Preamble

The House met at half-past Two o'clock

PRAYERS

[MADAM SPEAKER in the Chair]

Oral Answers to Questions — TREASURY

Welfare-to-work Strategy

Mr. David Taylor: To ask the Chancellor of the Exchequer if he will make a statement on the role of a minimum wage in his welfare-to-work strategy. [6177]

The Chancellor of the Exchequer (Mr. Gordon Brown): As my Budget made clear, there are three elements of our welfare-to-work strategy and our reform of the welfare state: first, encouraging the long-term unemployed into work; secondly, providing opportunities for men and women to gain skills; and, thirdly, making work pay. Set at a sensible level, a minimum wage is an essential element of making work pay. It ensures that family credit paid by the taxpayer goes to low-paid employees who need it, not to low-paying employers who do not.

Mr. Taylor: Is my right hon. Friend aware that, in former mining areas such as mine, the void left by thousands of lost jobs has often been filled by the arrival of firms paying poverty wages? Does he share my view that the fact that nearly 4,000 people in my area are paid less than £3 an hour is an indictment of the party of exploitation—the Conservative party? Does he agree that, in a fair society, the setting of a decent national minimum wage must be the cornerstone of any welfare-to-work strategy?

Mr. Brown: My hon. Friend is absolutely right about the need for a decent minimum wage. Under the last Government, hundreds of thousands of working men and women were earning less than £2.50 an hour. Many were earning less than £2 an hour, and some less than £1.50 an hour. It is precisely to sort out some of those problems that the Low Pay Commission has been set up, and will report in due course.
It is interesting that, increasingly, large numbers of employers are coming to support the minimum wage. The only group in society that appears to be completely against it is the Conservative party.

Mr. Lilley: Is the Chancellor aware that, however sceptical we may be about his welfare-to-work proposals, we hope that they will be at least as successful in getting people back to work as our measures, which have reduced youth unemployment by 100,000 over the past four years?
If, however, the Chancellor believes that reducing the cost of employment through job subsidies will persuade employers to increase the number of people they employ, does he also accept that the cost of employing people through a statutory minimum wage or the importation of European social costs will reduce the number of people employed? As the latter measures apply to millions of people and are permanent—unlike the Chancellor's windfall tax, which is temporary and applies to only 100,000 people—does the right hon. Gentleman accept that the net effect of his measures is work to welfare?

Mr. Brown: It is interesting that, in the shadow Chancellor's first question—I welcome him to his post, and to Treasury questions—he should mention Europe, and reveal that the position of Conservative Treasury spokesmen in regard to Europe has changed fundamentally since his appointment. Let me, however, answer directly his question about welfare to work. We have had to introduce our proposals not because the last Government succeeded but because they failed. At present, 20 per cent. of households have no wage earner. It is precisely to deal with such problems that we are introducing the welfare-to-work strategy.
As for the minimum wage, I should have thought that the Conservative party's period of reflection— which may be long indeed—would allow its members to look at what is happening around the world. America has a minimum wage; our European competitors have a minimum wage; Japan has a minimum wage. Every country that is ahead of us in the world prosperity league has a minimum wage. When will the Conservatives realise that, when Winston Churchill and Harold Macmillan supported a minimum wage, they were in the mainstream of society? The present Conservative party is on the fringes.

Mr. Sheerman: When my right hon. Friend considers his welfare-to-work proposals, which were tremendously popular at the general election where we achieved a real mandate to deliver them, will he consider the construction industry, not only in terms of the impact of the minimum wage, which can be nothing but healthy, but in respect of the way in which the previous Government allowed that industry to get away with bogus self-employment which cost the Exchequer millions of pounds that could have been used for welfare to work to provide decent training and get young people back into work?

Mr. Brown: I am grateful to my hon. Friend. First, we shall deal harshly with tax avoidance in any sector of the economy. That is why we have set up a review within the Treasury to examine the very issues that he has raised. [HON. MEMBERS: "Oh."] It is interesting that the Conservative party now does not want to deal even with tax avoidance. I should have thought that the Conservatives would support us at least in those efforts.
We have already had a number of offers from construction employers who want to be part of the welfare-to-work strategy and are offering training places on the programme. That shows, once again, that British employers are willing to support our new welfare-to-work programme. I believe that it will enjoy a higher status as a result.

Water Utilities

Mr. Swayne: To ask the Chancellor of the Exchequer what assessment he has made of the impact of his Budget on investment by the water utilities. [6178]

Mr. Gordon Brown: After consulting the regulators, it is my judgment that the windfall tax can be paid without any impact on investment.

Mr. Swayne: Can the right hon. Gentleman tell the House how he expects the privatised utilities to pay the £5 billion he is asking of them without increasing their charges, which means higher water bills; reducing their investment, which means more leakages; cutting employment; or reducing dividends, most of which go to pension funds?

Mr. Brown: I can say what I can because the water industry regulator has just said publicly that he would not expect any of the water companies to reduce their commitments. He has taken what I consider to he an objective view: that water companies have made excess profits that were recognised by Conservative Members when they reported from the Public Accounts Committee before the election and are perfectly capable of paying the windfall levy. It is interesting to note that the water companies are ready to pay, but, once again the Conservative party remains isolated as the one group in society which believes that they should not pay.

Mr. Pike: Is it not a fact that when the water companies were privatised, they received massive cash handouts from the then Tory Government and they faced no competition, as we could get our water from only one company and have our sewage dealt with by only one company? Is it not the case that, to date, North West Water has failed to deliver an improved service and deal with leaks, and the directors have made massive profits out of the privatisation?

Mr. Brown: What people will remember about the water companies over the past few years is that, under the Conservative Government, they made massive profits, there was an 80 per cent. increase in prices, substantial dividends were paid out, but very little corporation tax was paid. Indeed, in some cases, the water companies paid no mainstream corporation tax at all. All that was defended by the Conservative Government. The Public Accounts Committee estimated the replacement value of the water and sewerage companies' assets to be £138 billion and the profit that the Government received from the sale was £3 billion.

Mr. Bercow: Will the Chancellor continue to insist that investment by the utilities will be unaffected as a result of the imposition of the windfall tax, even if the utilities themselves insist and demonstrate otherwise?

Mr. Brown: I am grateful to the hon. Gentleman for pointing out that the water companies have substantial obligations to the public. I believe that they are perfectly capable of making those investments. Over the past few years, there have been share buy-backs, handouts to shareholders and special dividends as well as the excesses

in the boardroom. Water companies should be enhancing their investment programme and we are determined that that will happen.

Economic Cycle

Dr. Kumar: To ask the Chancellor of the Exchequer what plans he has to end the cycle of boom and bust. [6179]

Mr. Gordon Brown: The Budget set out a framework for monetary and fiscal stability to achieve our objective of high and stable levels of employment and growth. Today, the Bank of England has agreed with me that, if we are to prevent the cycle of boom and bust, inflationary pressures in the economy, which the previous Government negligently failed to tackle, must be brought under control. By taking tough action now to bring both the deficit and inflation down, the Government and the Bank of England are determined to ensure that this country does not return to the instability and negative equity of the Conservative years.

Dr. Kumar: I am grateful for that answer. Does my right hon. Friend agree that it is absolutely essential for home owners and businesses—[HON. MEMBERS: "Reading."]—that there is no return to the boom and bust economy of the 1980s—[HON. MEMBERS: "Reading."]—as we experienced under the Tory Government? Does he also agree that—[HON. MEMBERS: "Reading."]—it is regrettable that the Tories abdicated all responsibility for tackling inflation? Does he agree that they failed to tackle it?

Mr. Brown: I am grateful to my hon. Friend. I welcome him back to the House after his distinguished election victory. The Conservatives would be better advised to behave themselves in this Parliament in a way that they did not in the last.
We are determined that this country does not return to the conditions that we saw in the late 1980s and early 1990s, when a Conservative Government allowed inflation to get out of control and damage businesses and the ability of thousands—indeed, hundreds of thousands—of people to own their own homes. I remind my hon. Friend that, every month from December—December, January, February, March and April—the Governor of the Bank of England advised the then Chancellor that, if he did not raise interest rates, inflation would be in danger of getting out of control. We took the decision to raise interest rates and to give the Bank of England operational independence. It is now up to the Conservative party to tell us whether it would raise interest rates, faced with such inflationary pressures.

Mr. Malcolm Bruce: Does the Chancellor recognise that today's decision to raise interest rates by the Bank of England represents a thumbs down to two people? As he rightly said, the former Chancellor pursued an irresponsible monetary policy in advance of the general election and did not take the Bank of England's advice when he should have done to take the heat out of the economy. The decision is also a thumbs down for the present Chancellor for not delivering a Budget that lived up to his own billing that it would rebalance the


economy and help to keep interest rates down. Does the Chancellor accept that his Budget failed to live up to that billing?

Mr. Brown: The hon. Gentleman says that the Bank of England has criticised me today—it is quite the opposite. The Bank has acknowledged the effects of my Budget in slowing down the economy. We have to take a long-term view of the balance between monetary and fiscal policy. I believe that people will judge that my deficit reduction plan over five years brings the necessary stability in fiscal policy. We will not have the Liberal Democrats' policies, which are quite irresponsible.
The hon. Gentleman, who criticised us last week for not spending enough on the health service and education, should look at the press release that he issued before. He said that £500 million should be spent on the backlog of repairs and maintenance.

Mr. Bruce: This year.

Mr. Brown: May I just read the press release? It refers to a school building programme
with a 5 year investment programme of £500m".
We put in £1.3 billion.
On the health service, the hon. Gentleman referred to an
immediate injection of £300m into the NHS
plus
A £600m increase in next year's NHS Budget".
That is £900 million in total. We put in £1.2 billion. Instead of criticising us, the Liberal Democrats should he congratulating us.

Mr. Skinner: To ensure that we do not go back to the years of boom and bust, does my right hon. Friend agree that people who work for a living should be treated properly? Does he really think that he can stand aside, like Pontius Pilate, with the rest of the people on the Front Bench, ignoring the people down at Heathrow, those stewardesses out on strike who are hounded and intimidated by this evil man Ayling just because they are fighting not only to keep their trade union intact but for proper wages and conditions? Surely it is time that our people on the Front Bench understood that those people at Heathrow, many of whom voted Labour at the election, ought to be treated properly and that anybody in the management of British Airways should be told by the Government that it is time that they started treating their people properly?

Mr. Brown: I repeat to my hon. Friend what my right hon. Friend the Prime Minister said yesterday. It is a matter for management and trade unions to sort out, and the sooner it is sorted out the better.

Mr. Woodward: Given that the Chancellor justified his breathtaking 17 tax rises on the need to curb the consumer boom, will he explain why £5 billion of his £6 billion tax rises were taken from the corporate sector?

Mr. Brown: The hon. Gentleman should do some research on the Budget. He would find that I cut mortgage

interest tax relief and raised stamp duty and excise duties on cigarettes and petrol. A considerable sum of money will be taken out of the consumer sector of the economy.
What I will not do is pursue the irresponsible policy pursued by the previous Government, who knew that there were inflationary pressures in the economy and refused to take action. We have still to have an answer from the shadow Chancellor who, on the television at lunchtime, refused to answer the question whether he supported the rise in interest rates. Does he support me and the Bank of England, or is he not prepared to do so? Does he support the former Chancellor or the present Chancellor? It is time that we had some coherency from the Opposition.

Mr. Stringer: Does my right hon. Friend agree that we must not return to the experience of the late 1980s, when millions of households suffered from negative equity, which damaged the social fabric and the economic well-being of our society? Does he agree that the best way to ensure that we do not return to that situation is to control inflation?

Mr. Brown: I am grateful to my hon. Friend for making that point. In every constituency, men and women still suffer the effects of the stop-go economics practised by the Conservative Government. Home owners still have negative equity because of the failed policies of the Conservative Government. I assure the House that I will not make the mistakes that the previous Government made of allowing inflation to get out of control and causing instability, volatility and negative equity. The measures that I have taken and those taken by the Bank of England are necessary to restore balance to an economy that was in danger of becoming seriously out of balance because of the mistakes of the previous Government, who failed to take the necessary action.

VAT (Tourism)

Mr. David Atkinson: To ask the Chancellor of the Exchequer what representations he has received on the level of VAT on tourism. [6180]

The Financial Secretary to the Treasury (Dawn Primarolo): I have received a number of representations to the effect that the UK tourism industry suffers a competitive disadvantage as a result of VAT. Given the regular increases in recent years in the number of visitors to the UK and the amount of money they spend, there is nothing to suggest that the UK tourism industry is suffering, but I am keeping this matter under close review.

Mr. Atkinson: The Financial Secretary has acknowledged that this country's tourism industry, including our hotels, is at a competitive disadvantage compared with the tourism industries of other member states in the European Union. For example, the VAT level in France is 5.5 per cent.; in Belgium and Holland, 6 per cent.; in Greece, 8 per cent.; and, in Italy, 9 per cent. What initiatives does she propose to take to ensure a fair and level playing field for VAT on tourism throughout the European Union?

Dawn Primarolo: The tourism industry in the UK is not at a competitive disadvantage because of VAT. I draw the hon. Gentleman's attention to reports today in the


Financial Times which said that the UK hotel industry has achieved record profits, higher even than in the late 1980s, and that those profits are expected to increase in the next year, in London and in the regions.

Mr. Flynn: Does my hon. Friend agree that VAT receipts from tourism would be greatly improved if we put to greater use our under-used large houses, including Chevening and Dorneywood? Does she realise that seven extremely large homes, one with 600 rooms, are occupied by a single family? Would it not be the greatest boost to tourism if we could persuade the royal family to live in just two palaces?

Dawn Primarolo: I am grateful for my hon. Friend's advice, and I am glad to hear that he, like the Government, is committed to encouraging tourism. I am sure that my right hon. Friend the Chancellor heard his comments and, as my hon. Friend probably knows, he has declared his intention to ensure that there is use by the public of government buildings.

Departmental Spending Plans

Mr. Edward Davey: To ask the Chancellor of the Exchequer if he will commission the National Audit Office to examine the assumptions contained within the departmental spending plans published in the "Financial Statement and Budget Report 1997–98"; and if he will make a statement. [6181]

The Chief Secretary to the Treasury (Mr. Alistair Darling): My right hon. Friend the Chancellor asked the National Audit Office to examine the key assumptions underlying the fiscal projections in the Budget which he announced on 2 July. This was the first time that any Government had done that; the Chancellor has indicated that he sees a continuing role for the NAO in future Budgets, but the arrangements for that have not yet been made.

Mr. Davey: When the previous Chancellor announced his last set of spending plans, they were widely seen as unrealistic. The present Chancellor has said that there will be high inflation for the next few years, and his cash spending plans are widely seen as totally unreachable. Will the Chief Secretary commission the National Audit Office to review the current Chancellor's spending plans, or tell us which services or programmes he will cut to meet the "eye-wateringly tight" planning totals?

Mr. Darling: The hon. Gentleman is returning to a now-familiar theme of the Liberal Democrats. Let me make the position clear: we fought and won the election on the basis that we would put the public finances on a sound and proper footing. We will do that, although that means that tough decisions have to be made. I repeat the point that my right hon. Friend the Chancellor made to the hon. Member for Gordon (Mr. Bruce) a few moments ago. In terms of health and education, we have provided a real-terms increase in spending.
I have no wish to fall out with the Liberal Democrats, but they are being a little opportunistic—not for the first time, perhaps. In terms of capital expenditure, they asked us to spend £500 million, and we are spending £1.3 billion on schools. They asked us to spend £900 million on the

health service, and we are spending £1.2 billion. When we announced those totals, their immediate response was, "That is not enough". I caution the hon. Gentleman and ask him to bear in mind the fact that some of us have responsibility for the economy and cannot call for opportunistic spending at every opportunity.

Mr. Sheldon: Since the Comptroller and Auditor General is an Officer of the House, is it not splendid that my right hon. Friend the Chancellor is getting his views and, I hope, aiming to expand that role in the future?

Mr. Darling: My right hon. Friend has substantial experience of these matters. We want to use the National Audit Office more. It is independent of Government, although the Auditor is an Officer of the House. The public would respect Governments all the more if they planned their Budget forecasts on realistic assumptions, and that is what we did. The unrealistic assumptions of the previous Government have led to some of the problems that we now have to clear up.

Mr. Heathcoat-Amory: Will the Chief Secretary come clean about the real cut in public expenditure announced in the Budget? Does he agree that the higher inflation that the Government are now predicting for the years ahead means higher costs for all public services, yet no more cash is allocated for those years? Does he agree with independent calculations that this means a £3 billion cut in real public expenditure this year and a £5.25 billion cut next year? Will he confirm these figures, which flow directly from the Red Book published by his Government?

Mr. Darling: Welcome to the new friends of public spending. The Conservatives are now telling us, in effect, that the figures that they left us do not add up. The right hon. Gentleman must accept that we have inherited a difficult financial position, largely because of the actions of the Government of which he was a member until he resigned 12 months before the election. Frankly, we will take no lectures from the Conservative Opposition on the conduct of the public finances. We are prepared to take hard decisions to ensure that public spending is on a proper footing for the rest of this Parliament.

Public-private Partnership

Gillian Merron: To ask the Chancellor of the Exchequer what new measures he is proposing to increase public-private partnership. [6183]

The Paymaster General (Mr. Geoffrey Robinson): The Government have reinvigorated the private finance initiative and accepted the 29 recommendations of the Bates report. We will see to their timely implementation between September and December. We have asked Departments to prioritise their schemes and I am pleased to be able to say that schools and hospitals—two early priorities—are proceeding well. Within the next few days, I also hope to announce the chairman of the new task force which we are setting up.

Gillian Merron: I thank the Minister for his reply. Is he aware that in my constituency of Lincoln we have a first-rate example of public-private partnership in the


presence of the new university of Lincolnshire and Humberside, which is the first purpose-built university in this country for many decades? Will he and his ministerial colleagues study such models of good practice, where councils, businesses, local organisations and individuals have joined to ensure the co-operation necessary for the provision of educational excellence?

Mr. Robinson: I am grateful to my hon. Friend for drawing to my attention the excellent example of Lincolnshire and Humberside. I commend it to the House as an example of the public and private sectors working well together. In particular, I compliment my hon. Friend on her contribution to that partnership. In marked contradistinction, we note that the private finance initiative got nowhere under the incompetence of the previous Conservative Government. We are determined to make a success of it.

Mr. David Heath: Whereas any extension of public-private partnerships is to be welcomed, does the hon. Gentleman appreciate that in many areas—rural areas, in particular—where the schemes are small and scattered and we are dealing with single classrooms or schemes of that type, the PFI will never he the appropriate solution? Does he appreciate that, however much it is extended, it will be no substitute for a proper capital investment programme in local authorities?

Mr. Robinson: The hon. Gentleman will be aware that, in the next five years, we will be spending three times what the Liberals intended to spend. He must also be aware that, of that £1.3 billion programme for schools refurbishment, two thirds is intended to be non-PH and so, in that sense, directly for schools. As I am sure he will agree, where the PFI can work for the other third, we will get incremental spending in so far as it is successful in those areas, and I am sure that it will be.

Mr. Boswell: Although I am sure that the Paymaster General will be pleased to hear that we agree with public-private partnerships where they offer good value for money to the taxpayer, does he agree that the biggest case of that is probably the existence of the pension funds, which have built up some £650 billion of assets? Does he feel that it is wise or conducive to future good will and the success of such collaboration to introduce a tax, through the changes in advance corporation tax, to the tune of £5 billion a year, with all the consequent effects either in driving people back into the public sector or in requiring rebates to be adjusted—therefore at greater public expenditure cost?

Mr. Robinson: The question is totally irrelevant to the PFI, as the hon. Gentleman well knows. The fact is that the Conservative Government made a total flop of the PFI and this Government are going to make a success of it.

VAT (Domestic Fuel)

Mr. Hutton: To ask the Chancellor of the Exchequer if he will make a statement on his plans to reduce value added tax on domestic fuel. [6184]

Dawn Primarolo: My right hon. Friend announced in the Budget last week that VAT on domestic fuel is to he cut to 5 per cent.

Mr. Hutton: I am grateful to my hon. Friend for that reply. Can she confirm that millions of pensioners and

people on low and fixed incomes will benefit directly as a result of the reduction in VAT on gas and electricity, which, together with the other changes in the Budget last week, will lead to significant reductions in fuel bills later this year? Has that not served to emphasise one of the main differences between the Government and the Opposition? The latter broke their promises on VAT. We keep ours.

Dawn Primarolo: I can confirm that the average household will be more than £18 a year better off and that the poorest households, including pensioners, will benefit the most, because it will be a greater proportion of their income. The implementation date will be 1 September, to ensure that they get the benefit in this winter's bills.

Mr. Yeo: In view of the Government's propensity to claim that they, keep their promises, why, when an official Front-Bench Labour spokesman before the general election promised that, alongside the Budget Red Book, a green hook would be published, setting out the Budget's environmental consequences, no such book has appeared?

Dawn Primarolo: We have every intention of keeping that promise from the first full Budget.

Mrs. Mahon: Does my hon. Friend agree that many decent people will welcome the alleviation of fuel poverty and that reducing cold-related illnesses will save the national health service a great deal of money?

Dawn Primarolo: I agree that it is important to ensure that people can keep warm and that the scandal of hypothermia is tackled, with the consequent reduction in costs for the national health service. We also intend to introduce an insulation and energy efficiency programme to ensure that people can not only heat their homes and stay warm but can do so as efficiently and cheaply as possible.

Mr. Swinney: In implementing the welcome cut in value added tax on domestic fuel in early September, will the Financial Secretary consider ensuring that customers who have credit balances in their gas and electricity accounts suffer no prejudice because of their prepayments or increased contributions to their accounts, and that they do not receive bills that they need a maths degree to understand?

Dawn Primarolo: I can confirm that the provisions in place for the energy companies ensure that they will be able to apportion bills to ensure that people get the full 5 per cent. reduction; there should be no problems with that.

Exchange Rate

Mr. MacShane: To ask the Chancellor of the Exchequer what representations he has received on the exchange rate; and if he will make a statement. [6185]

The Economic Secretary to the Treasury (Mrs. Helen Liddell): My right hon. Friend has received a number of representations concerning the exchange rate. The Government want a stable and competitive pound over the medium term, consistent with the objective of


price stability. The focus of policy will be on achieving the low inflation and sound public finances that are the necessary conditions for sustained exchange rate stability.

Mr. MacShane: Has my hon. Friend had a chance to study the attempts in the House in the past year to get the previous Government to take action on the ever-increasing value of the pound, which has done so much damage to steel and other exporting industries? Is she aware that the inheritance of the Tory high pound might benefit Conservative Members such as the shadow Chancellor, who can now renovate his chateau in Normandy much more cheaply, but does immense damage to our exporting industries? Does she share my concern that the pound is too high? It should be stable, but at a lower rate.

Mrs. Liddell: I share my hon. Friend's concern about the impact of the high pound on manufacturing and other industry. He makes the most apposite point in drawing attention to the previous Government's failure to tighten monetary policy effectively. We are living with the consequences of a Government who were more concerned with their own Back Benches than with governing the country.

Mr. Viggers: Have the Government received representations about the exchange rate from companies with substantial foreign earnings, particularly from those who would have been affected by the abolition of the foreign income dividend? Is it true that the Government are about to announce the most humiliating U-turn and scrap the Budget measure that would have abolished FIDs?

Mrs. Liddell: I regret the fact that the hon. Gentleman did not find it possible to be in the House on Friday when my hon. Friend the Paymaster General referred to those matters. The Government have no intention of making any U-turns. We pursue the policies that we were elected on in the general election; I realise that that is something Conservative Members find very difficult to accept.

Kali Mountford: As early as February this year, it was predicted that there was only a one in four chance of our meeting the inflation target, yet the previous Government did nothing about it. Will my hon. Friend comment on the implications of that in the current economic situation?

Mrs. Liddell: My hon. Friend makes a valuable point. Six times in a row, the previous Government were warned about the inflation target and, six times in a row, they chose to go for narrow political considerations. That is why my right hon. Friend the Chancellor of the Exchequer is determined to put the setting of the inflation rate on a firm long-term footing. That is a key way of ensuring stability in the economy and an exchange rate that is acceptable in the medium and long term.

Windfall Tax

Mr. Spring: To ask the Chancellor of the Exchequer if he will publish the representations he has received from business organisations about the windfall tax. [6186]

Mr. Geoffrey Robinson: No.

Mr. Spring: I thank the hon. Gentleman for his answer. Is he aware of the track record of Anglian Water in

improving services for people in East Anglia? Is he further aware that Anglian Water has made it plain that, to pay the windfall tax, it will have to borrow the full amount, thereby adding to its costs and to the difficulties of its investment programme for improving water services all over East Anglia?

Mr. Robinson: As the hon. Gentleman knows, Anglian Water, like other water companies, has paid hardly any mainline corporation tax. Perhaps Anglian should take a leaf from Hyder's book. Its chairman, Graham Hawker, today released a press statement in which he said:
Hyder does not intend in challenge the legality of the windfall tax and it will be paid from borrowings.
Hyder is confident that it can deliver satisfactory dividend growth.
The group remains committed to its current programme of customer rebates and discretionary capital expenditure. Customers are not bearing the burden of the windfall tax.
That company probably bears a relatively heavier burden than Anglian.

Mr. Mackinlay: Does my hon. Friend understand that those of us who support the windfall tax are somewhat disappointed about its coverage? What about the people who were able to buy British ports, including my port of Tilbury, at a snip? Time and again, they became millionaires overnight. That is unfair. Some of those massive profits should be returned to the dock communities that created them. The House gave a private monopoly of London's principal airports to BAA, which raked in large sums of money that should be returned to the British people and to the workers whose enterprise created that wealth.

Mr. Robinson: I understand my hon. Friend's feelings on those matters, but he will agree that those organisations did not fall within the tightly drawn criteria that we had to use for the definition of the windfall tax. I am sure that he also agrees that lone mothers, school children and the unemployed, old and young, will greatly benefit from the uses to which we intend to put the tax.

Mr. Ian Taylor: Does the Minister accept that the windfall tax on British Telecom at least tells its directors not to try to do cosy deals with the Labour party? Has he considered what message he is giving to the telecommunications industry? Is he saying that the Office of Telecommunications failed in its job? Can he explain why prices have fallen by 40 per cent. for consumers since 1984 when BT was privatised? What impact on competition does he expect the more than 150 competitors now in telecommunications to have?

Mr. Robinson: I welcome, with the hon. Gentleman, the good progress of BT. The failure—and it was a big one—was the serial commercial incompetence of the Tory Government in selling off public assets far too cheaply and delivering a had deal for taxpayers, which we are going to put right.

Fiscal Policy (Pensioners)

Mr. Bayley: To ask the Chancellor of the Exchequer if he will meet representatives of pensioners to discuss the impact of his fiscal policy. [6188]

Mr. Darling: We are always keen to know the views of representative bodies and are happy to meet those that wish to make representations to us on an appropriate basis.

Mr. Bayley: Is my right hon. Friend aware that the provision in the Labour Government's first Budget to cut the Tories' hated VAT on fuel was widely welcomed by pensioners in York? Does he agree that that shows that Labour's tax promises can be trusted? Will he confirm that the poorest households, including pensioners, will gain the most in proportion to their incomes, from this Labour tax cut?

Mr. Darling: My hon. Friend is right. I am sure that he owes a large part of his very large majority at the general election to the fact that the Conservatives wanted to raise VAT on fuel to the full 17.5 per cent. We kept our promise to reduce VAT on domestic fuel to 5 per cent., just as we have kept every other manifesto promise.

Mr. Page: Does the right hon. Gentleman have any plans to meet representatives of the secretaries to Members of Parliament to discuss the impact on their pensions of the changes to ACT? Has he any plans to increase non-contributory payments so that they can enjoy the same pensions to which they looked forward just before the infamous Budget?

Mr. Darling: I am not aware of any representations. I caution the hon. Gentleman and many of those who sit on the Benches alongside him: they do no one any good by creating false scares that have no justification.

Mr. Lilley: Yesterday, the Chief Secretary to the Treasury conspicuously failed to defend the Financial Secretary's claim that the £5 billion extra tax on pension funds was
good for pensions and pensioners, not had for them … People should understand that our reforms will benefit pension funds."—[Official Report, 3 July 1997: Vol. 297. c. 507]
Will he, today, defend that remark? If this damaging measure is good for pension funds, why is it necessary to protect charities and other funds from its impact?

Mr. Darling: As the right hon. Gentleman knows, I spoke for some 45 minutes yesterday—perhaps too long—during which I defended the Government's policy to the hilt because the position is correct. We have removed a distortion in the tax system. It should be for managers and businesses to decide what to do with their profits. The tax system should not decide whether they are reinvested or distributed. The decision will be good for pension funds because it will enable companies to grow. The stock market has risen not only since the election but since the Budget announcement because people realise that the decisions that we have made will add to the wealth of companies and, therefore, to the wealth of pension funds.
The right hon. Gentleman should think twice about attacking us because in 1993 the Government of which he was a member embarked on a bare-faced raid on pension funds because, as the right hon. Member for Charnwood (Mr. Dorrell) admitted at the time, they saw it as a soft touch for raising money. We have reduced corporation taxes. That will benefit companies and, therefore, pensions.

Welfare-to-work Strategy

Mrs. Dean: To ask the Chancellor of the Exchequer what discussions he has had with businesses about the implementation of his welfare-to-work proposals. [6190]

Mr. Gordon Brown: The chair of the advisory task force, Sir Peter Davis, has been involved in discussions with me and with other Ministers on aspects of the design and implementation of our new deal for the unemployed. On 25 June, I hosted a breakfast seminar for senior business figures on this very matter. I am pleased to say that our proposals have received support from many of Britain's leading companies.

Mrs. Dean: The welfare-to-work proposals are certainly important to my constituency, which covers six of the poorest wards in the west midlands. Does my right hon. Friend agree that the policy will realise the wasted talents of our young people and of the long-term unemployed? Does he agree that that can only be of benefit to industry and the country in general?

Mr. Brown: I believe that there has been a substantial welcome throughout the country, including the business community, for our proposals to tackle the problems of youth and long-term unemployment. Something should have been done many years ago. People understand that the Government made a promise at the election that they would take action on the issue. We have raised a windfall levy from the utilities to pay for the action that we are taking. We are a Government who keep our promises to the young people of Britain.

Mr. Peter Bottomley: Will the right hon. Gentleman acknowledge that, since his party first announced its proposals in opposition, the number of people who need the benefit of welfare to work has reduced and that his actual target is numerically impossible to meet? At the beginning of Question Time, when the minimum wage was mentioned, it was put to the right hon. Gentleman by the hon. Member for North-West Leicestershire (Mr. Taylor) that a significant number of adults earn less than £3 an hour. Is it possible that, in line with welfare to work, the minimum wage will be introduced at £3 an hour?

Mr. Brown: The hon. Gentleman should know that the Low Pay Commission is examining exactly that matter. The minimum wage will be decided after consultation involving the Low Pay Commission, which includes representatives from business, the trade unions and other sections of the public, including guaranteed representation for small businesses. There are more than 500,000 young people out of work. In Britain today, 20 per cent. of households include no one earning a wage. That is a sad and tragic commentary on 18 years of failed Conservative government.

Sterling

Mr. Barry Jones: To ask the Chancellor of the Exchequer if he will make a statement on the current strength of the pound. [6191]

Mrs. Liddell: The Chancellor keeps a close watch on the strength of the pound and is conscious of its impact on companies that are heavily involved in exports.

Mr. Jones: Does my hon. Friend know of the British steel industry's difficulties with the export of its products? In particular, is she aware of the anxieties of Shotton steelworkers in my constituency which are felt because of difficulties in exporting their products as a result of the high value of the pound? Does she agree that the Conservative party has to face up to a large measure of guilt for that?

Mrs. Liddell: I congratulate my hon. Friend on the concern that he has consistently expressed for the steel industry in his constituency. I am aware that, because of an efficiency drive by the company that runs Shotton, there have been 69 redundancies. We are acutely conscious of the impact of the previous Government's failure to act on the strength of the pound and we are conscious of its impact on exports. Indeed, my hon. Friend the Paymaster General is to chair a special forum devoted to exports. I am sure that he will concentrate on those aspects of the export industry that directly relate to the steel industry.

Sir Peter Tapsell: If the hon. Lady and her colleagues on the Treasury Bench are so proud of the fact that the Bank of England, on their behalf, is tightening monetary policy, how does she intend to face up to the real dilemma that every time interest rates go up not only will the pound sterling strengthen still further but mortgage rates will also go up, with the result that the cost of living index will go up? Surely that real problem will require fiscal approaches.

Mrs. Liddell: The hon. Gentleman rehearses the very argument that got us into difficulties in the 1980s and the Government he supported knew all about that. Before I came into the Chamber today I learnt that the pound has fallen by 2 pfennigs.
I take the hon. Gentleman's point about monetary policy. In that respect, it is important that we have a coherent long-term policy on interest rates. That is why the Chancellor has taken the sensible decision to ensure that the Monetary Policy Committee should take decisions on interest rates independent of the political grandstanding that took place under the previous Government. That affects mortgage rates, which affects the well-being of families throughout the country.

Mr. Geraint Davies: Is not today's failure by the shadow Chancellor to say whether he agrees with the announced interest rate increase a clear signal that the Conservatives can never be trusted again not to lead us into a boom-bust cycle?

Mrs. Liddell: My hon. Friend is perfectly correct. The shadow Chancellor is frightened to say yea or nay because he is frightened about which part of the Conservative parry he might have to play to for his further preferment.

Business Costs

Mr. Gibb: To ask the Chancellor of the Exchequer when he last met the director general of the Confederation of British Industry to discuss the impact of the Budget on business costs. [6192]

Mr. Darling: My right hon. Friend the Chancellor met the CBI on 18 June and I am due to meet its representatives shortly.

Mr. Gibb: At that meeting, did the Chancellor raise his plans to abolish foreign income dividends? Does the Chief Secretary now regret that decision? Will he confirm whether he will proceed with that ill-thought-out and highly damaging measure? The earlier answer from the Economic Secretary will simply add further confusion to an already confused and highly unsatisfactory situation.

Mr. Darling: The situation is not confused at all. My hon. Friend the Paymaster General made the Government's position absolutely clear on Friday at the conclusion of that day's debate on the Budget. If the hon. Gentleman wants to see what my hon. Friend said, he need do no more than read Hansard. The situation is widely understood, particularly by those affected.

Mr. Winnick: Would not business costs be less if some of the top bosses paid themselves less in increases? Is my right hon. Friend aware of the 20 per cent. increase given to the director general of the BBC? He will now receive a salary of £354,000 a year. That is in addition to a number of perks, including petrol for private use, two cars and the rest of it. At the same time, redundancies have been announced at the BBC and, in general, employees receive an average increase of less than 2 per cent. Is it not time that the director general of the BBC was told that the organisation is in the public sector and that those who lead public service organisations should behave somewhat differently? Frankly, is it not time that the director general left that organisation?

Mr. Darling: I am bound to confess that I am not familiar with every detail of the director general's pay package. I shall repeat what I have said before, which is that those who lead companies should set an example to all their employees and all those concerned with the firm. Whether they do that is largely a matter for the companies and organisations involved and those to whom the director is responsible.

Business Research and Development

Mr. Breed: To ask the Chancellor of the Exchequer if he will make a statement on his proposals for fiscal incentives for investment in business research and development. [6193]

Mrs. Liddell: The 2 per cent. cut in corporation tax announced in the Budget, combined with the abolition of tax credits for pension funds, provides a better environment for long-term investment, including investment in research and development.

Mr. Breed: Does the Economic Secretary accept that perhaps even more of companies' Funds should be


invested in research and development? Does she also agree that further incentives, by way of providing allowances against additional corporation tax, might be a better use of tax receipts?

Mrs. Liddell: The hon. Gentleman asks a sensible and interesting question, but I shall refer him to the statement that my right hon. Friend the Chancellor made on the Budget. The purpose of reducing corporation tax and abolishing tax credits for pension funds was specifically to ensure that companies could take their own decisions on research and development by retaining more of their profits.
If the hon. Gentleman cares to check the most recent figures for research and development—those of 1995—he will find that there was a 2 per cent. drop in research and development in the United Kingdom. I believe—and the Government believe—that companies that are able to invest more of their own retained profits have a much greater opportunity to invest them in research and development.

Mr. Nicholas Winterton: I warmly welcome the Government's Budget decision to improve capital allowances—something for which I have been campaigning for a great many years. But does not the hon. Lady accept that the increase in interest rates—they will have gone up three times in seven weeks under the new Government—will be counterproductive, particularly to manufacturing industry, which will not he able to invest and may well start making people redundant when it faces increased competition because of the value of the pound?

Mrs. Liddell: I am surprised that the hon. Gentleman should make that point as it allows me to return to the Dispatch Box and say that if the previous Chancellor of the Exchequer had been prepared to accept the advice of the Governor of the Bank of England, action would have been taken on interest rates at an appropriate time. It was the complete failure of the previous Chancellor to have the courage to accept the advice of the governor that has created a number of interest rate rises in recent months.

Rev. Martin Smyth: While I welcome the Government's response, does the Economic Secretary agree that good firms will seek to invest in research and development—some have been following the foresight plan—but that the Treasury does not seem to be fulfilling

its side of the bargain? Is it not important that the Treasury should do so? Is this not a problem of old-fashioned interpretation—with more money being invested in pure research, but not enough in applied research?

Mrs. Liddell: I am interested in the hon. Gentleman's point; indeed, I shall return to the point that I made earlier. One reason why the Government cut corporation tax was that the Treasury believes that more money should be invested by companies in accordance with their own priorities. The Treasury does not believe that companies should be forced into having to make dividend payments that might not be in line with their best interests in future. I acknowledge the importance of research and development—particularly in Northern Ireland and in my country, Scotland, especially for high-tech, small companies. It is important that we create a climate in which companies feel free to make those investments without extraneous pressures on them.

Government Assets Register

Mr. Love: To ask the Chancellor of the Exchequer when he expects the register of government assets to be completed; and when he will publish the results. [6194]

Mr. Darling: The Government are planning to complete the register of Government assets and will publish it by November, as we promised in our manifesto.

Mr. Love: May I take this opportunity to welcome the fact that the Government are producing their register in November? Their willingness to publish the results show that they are committed to openness and transparency in their economic policy. I also welcome the fact that, for the first time since the Domesday hook, the Government have a complete list of what they own. Does my right hon. Friend agree that the Government can make more informed use of their assets by knowing exactly what they own?

Mr. Darling: Many people would find it astonishing that the Government have not, until now, known what they own. As my hon. Friend said, for the first time, this November we will be able to show what the Government own. We intend to publish that register because it will enable the Government to make decisions about how best to use public assets in a way that people find acceptable and put them to their optimal use.

Bosnia (War Criminals)

The Secretary of State for Defence (Mr. George Robertson): With permission, Madam Speaker, I should like to make a statement about indicted war criminals in Bosnia Herzegovina.
At about 8 o'clock this morning London time, British troops serving with the NATO-led stabilisation force in Bosnia took action to detain two individuals against whom the International Criminal Tribunal for former Yugoslavia—the ICTY—had served sealed indictments.
One was Simo Drljaca, the former police chief of the municipality of Prijedor; a town near Banja Luka in Bosnia Herzegovina. The other was Milan Kovacevic, director of the Prijedor hospital.
The two individuals had been indicted by the ICTY for complicity in genocide, for acts against the Bosnian Muslim and Croat people, in the municipality of Prijedor, between 29 April 1992 and 31 December 1992. In 1992, Drljaca was the Deputy Minister of the Interior of Republika Srpska and thereafter the chief of police in Prijedor. Kovacevic was formerly president of the executive board of the municipality of Prijedor.
The first indictee, Drljaca, was challenged this morning by SFOR personnel. He immediately drew a pistol and shot and wounded one of our soldiers. The other soldiers then returned fire in self-defence and Drljaca was fatally wounded. Two other people who were with Drljaca were detained. They have been transferred to The Hague. Three handguns were recovered at the scene.
Drljaca and the wounded soldier were transferred by helicopter to Tuzla military hospital. The British soldier was wounded in the leg, but is not seriously injured. Milan Kovacevic was detained at the hospital and has now been arrested by the ICTY and transferred to The Hague.
Those detentions took place in accordance with the stabilisation force's mandate from the North Atlantic Council, as NATO Secretary-General Solana has made clear. The action had the specific authority of the Secretary-General, the Supreme Allied Commander Europe and the North Atlantic Council. SFOR troops have instructions to detain indictees if they come across them in the course of their normal duties, and providing the tactical situation permits. The SFOR mandate has not been changed. The injury to our soldier and the death of Drljaca illustrate the grave risks involved in such operations and the courage and selflessness of those who serve us.
I am sure that the House will join me in congratulating and commending the courage and professionalism of the British forces involved. I am very proud of their performance, which was up to the highest military standards.
The Government have made it clear repeatedly that they believe that all those indicted for war crimes should face trial at the International Tribunal at The Hague. I strongly held that view when I was an Opposition spokesman, and I repeated my personal commitment—and that of this Government—at the press conference that I held in Sarajevo in May.
With the Chief of the Defence Staff, General Guthrie, I went to Pale on the same visit and told the Bosnian Serb member of the Bosnia Herzegovina presidency, President

Krajisnik, of our serious interest in indicted war criminals and, I have to say, we formed the clear impression that the Republika Srpska authorities intended to do little to discharge their solemn obligations. They were not, and have not since been, left in any doubt about the resolve of Britain and our allies to bring to justice those accused of such terrible acts. We will take action when it is practical and sensible to do so.
Thousands of British troops have now served in Bosnia in United Nations and NATO-led operations. They have served to bring peace and stability to a small country whose people have suffered unimaginable horrors. Our troops, like those who acted this morning, serve with skill, professionalism and a genuine commitment to restore a semblance of normality and unity to Bosnia Herzegovina. We owe them and their families a huge debt and today is a good day to make that very clear.

Sir George Young: I welcome the right hon. Gentleman's statement and confirm that the Opposition give their full support to the action taken by British troops as part of the NATO operation in Bosnia. I assure the House that we strongly support action taken to bring to justice indicted war criminals charged with genocide and other serious crimes.
We join the right hon. Gentleman in wishing a speedy recovery to the injured British soldier and in commending British troops for the bravery that they have displayed under fire. Does not that bring it home to everybody that peacekeeping missions inevitably bring some risk to life and limb?
I quite understand that these are highly sensitive matters and that the Secretary of State will not want to divulge additional details. However, would I be right in saying that the mandate has not changed, but the way in which it is being implemented may have been changed? Was that discussed at the recent NATO summit?
What is being done to ensure that the entity leaders in the region are co-operating in bringing alleged war criminals to justice? Are all necessary steps being taken to deal with possible retaliations against British troops as a result of this morning's incident? How many indicted war criminals have been arrested and how many remain to be brought to justice? What would the implications be if NATO were to withdraw next year, leaving at liberty men charged with such serious offences?
Finally, does not all that underline the need for the United Kingdom to retain well-trained and well-equipped armed forces if we are to play our full part in NATO operations?

Mr. Robertson: I thank the right hon. Gentleman for his support for what is being done and for the sensitivity that he has shown for the necessity to keep many of the operational details as confidential as possible.
The decision behind the action was taken at the very highest level in NATO—and that is a point worth underlining again—by the North Atlantic Council and the Supreme Allied Commander Europe, and it is within SFOR' s existing mandate.
The right hon. Gentleman asked about the number of people who had been arrested on war crime charges. I cannot give him the precise figure, but 75 other ICTY indictments are outstanding—54 Bosnian Serbs, 18 Croats and three Muslims. At every possible opportunity,


we repeat the obligation of all the entity partners inside Bosnia Herzegovina to comply with their obligation to hand over those personnel to the International Tribunal.
The right hon. Gentleman mentioned operational details and asked whether there might be retaliations. We are well aware of the sensitive nature of the circumstances in Bosnia Herzegovina, and they were clearly part and parcel of the advance plans that we made. On his point about the dangers of NATO withdrawal next year and the end of the mandate for the stabilisation force, those matters are part of a continuing discussion. What matters at the moment is making sure that progress towards the Dayton objectives is maintained. I prefer to concentrate my energies and efforts on that and not become mesmerised by any withdrawal date. The purpose of Dayton and of the stabilisation force is to bring unity to Bosnia Herzegovina, and we must continue to exert pressure to accomplish that goal.
The right hon. Gentleman is absolutely right that today's action and the professionalism of our troops serving in Bosnia Herzegovina and elsewhere—including in the United Kingdom—show the need to maintain powerful armed forces. In the general election, the Government made a major commitment to powerful armed forces, and we intend to sustain that commitment.

Mr. Menzies Campbell: I also commend the professionalism and bravery of the United Kingdom forces involved in today's operation and express my sympathy to the injured soldier. I commend the Secretary of State for his reticence and restraint in describing the events. I hope that the House will accept that, for reasons of operational effectiveness and security, he should not be pressed further on matters of detail.
Hon. Members with an interest in that region understand that its long-term stability will ultimately depend on the apprehension of General Mladic and Mr. Karadzic. Do not today's events, however, demonstrate the difficulties likely in endeavouring to effect such apprehensions, not least because both men are likely to be much more heavily guarded and almost certainly indifferent to the possibility of civilian casualties?

Mr. Robertson: I am grateful to the hon. and learned Gentleman for his support for today's action. He is right to note my reticence on matters of operational detail. I intend to maintain that reticence during today's cross-examination on my statement—not because I am not proud of the action or the meticulous planning that went into it, but because of obvious reasons of confidentiality and sensitivity. He is right to express sympathy for the soldier who was lightly injured in this morning's events. Those good wishes will be passed on. He is also right to mention the risks involved in any exercise in that part of the world. Today's action amply demonstrates those risks.
Some indictees are well known and, naturally, attention has been focused on them. I should like to describe the situation in Prijedor, however, for the benefit of those who may believe that it is insignificant in comparison to Pale or that the two indictees targeted today were somehow lesser than the Mladics and the Karadzics. Before the war in Bosnia, Prijedor was a multi-ethnic city that contained Muslims, Serbs and Croats. In 1992, it was the site of most brutal and appalling episodes of ethnic cleansing, as

the Serb population forcibly expelled Muslims and Croats from the city. Concentration camps were established in Omarska and Trnopolje as holding sites for Muslim captives. There are accusations of mass rapes at one camp, and survivors of another camp claim that male prisoners were forced by Serb camp guards to bite off one another's genitals.
We are talking about the scene of some pretty horrifying war crimes. Today's action was taken in the light of those accusations.

Mr. John McWilliam: I thank my right hon. Friend for his statement and, on behalf of all hon. Members, I ask him to wish the injured soldier a speedy recovery from his wounds. Does my right hon. Friend accept that the presence in one area of so many people indicted for war crimes is in itself destabilising and contrary to the reason for the stabilisation force? I commend the actions of British and allied forces in attempting to stabilise the area, but is it not an indictment of the entire international community that the likes of Mladic, Karadzic and others are apparently able to move around the area at will? Will he assure the House that the strongest pressure will be placed not only on Republika Srpska but on Croatia and Bosnia, to ensure that the activities of those people are curtailed and that they are handed over to the proper authorities?

Mr. Robertson: I am grateful to my hon. Friend for the sympathy and support that he has expressed. We have in no way diminished our resolve in relation to those indicted of war crimes; indeed, today's action is an illustration of the fact that we have not forgotten. Maximum pressure will be kept up on the authorities in Bosnia Herzegovina on whom the prime obligation lies to deliver those indicted of war crimes for a fair trial at the international court at The Hague.

Mr. Nicholas Soames: May I join in the satisfaction so well expressed by the right hon. Gentleman with the conduct and success of our troops in what was clearly an extremely hairy operation, which they conducted with great skill and bravery? Does he agree—I endorse the words of the hon. and learned Member for North-East Fife (Mr. Campbell)—that the indicted war criminals remain a cancer in the life of that country and that, in the interests of stability and peace, they must be dealt with according to the law? Will he confirm that, as they move around, British troops will continue to remain eagle-eyed for opportunities in their normal course of business to deal with them and that, where that is not open to them, other steps will be taken to secure the indictees?

Mr. Robertson: Again, I welcome the comments of the hon. Gentleman, who was a Defence Minister in the previous Government. I also welcome his support on this occasion when I believe the House is united. We shall have to maintain the pressure for those who have been indicted to stand trial. They will get a fair trial, and those who believe that they are innocent and that the accusations have been trumped up will be dealt with fairly and properly in the international court before their international peers. The upholding of the international law is a critical issue, to which the whole stabilisation force from 34 nations is committed.

Mr. David Winnick: The action taken today by the allied forces is, of course, highly


commendable. What action is being taken to try to persuade the authorities in Belgrade to co-operate, bearing in mind the fact that at least one of the two top criminals mentioned by the hon. and learned Member for North-East Fife (Mr. Campbell) was said to be in Serbia proper very recently? One hopes that the Serbian authorities will recognise how essential it is that, if they are to receive economic assistance, they must co-operate with the international community.
As a lad, I followed closely what happened in Nuremberg in 1946, and I have consistently taken the view that those who are alleged to have committed terrible crimes against humanity should certainly be brought to justice. The most effective means is an international tribunal as has now been established, and which was in fact in action, in a different form, 51 years ago.

Mr. Robertson: I agree with my hon. Friend that it is necessary to bring those who have been indicted to the international court. That is what we are attempting to do. The authorities of the Republic of Serbia have been constantly reminded of their obligations—their voluntary obligations—under the Dayton accord to deliver any of those who have been indicted. There is no doubt that the Republic of Serbia will not gain international recognition unless it fulfils those obligations.

Mr. Martin Bell: May I compliment the right hon. Gentleman on his statement and congratulate the British soldiers on the professional way in which they carried out the operation? It has been a long time coming and if it is only a new interpretation of the mandate, it is greatly to be welcomed. The gentlemen concerned are very well known; they are not minor figures, and this is a very significant development. Will the right hon. Gentleman assure us that all the SFOR nations are on board in this enterprise and that British soldiers are not likely to become the arresting arm of SFOR?

Mr. Robertson: I thank the hon. Gentleman for his comments, especially in relation to individual indictees. Today's operation was a multinational action that took place under the stabilisation force's mandate. It was endorsed at the highest multinational level possible, by the NATO Secretary-General and the Supreme Allied Commander Europe. The latter has made it clear, on the day he changes command, that it was authorised in advance by both of them and by the North Atlantic Council.
The hon. Gentleman is absolutely right: our soldiers acted with the professionalism and skill we expect of them, but they did so as part of a multinational effort, and it would be grossly unfair and wrong if they were to be singled out in any way as a result of what they have done.

Ann Clwyd: I thank my right hon. Friend for one of the clearest statements of intent by the

Government that I can remember, to bring to justice those responsible for war crimes, crimes against humanity and genocide. I remind him that in January we launched a cross-party campaign in the House with the backing of the Prime Minister. the former Prime Minister and many others to bring Saddam Hussein to justice. The campaign was then promoted in Washington and will be promoted again in Strasbourg next week. Does he envisage a similar exercise to bring to justice war criminals such as Pol Pot and Saddam Hussein?

Mr. Robertson: I thank my hon. Friend for her welcome and her warm words about today's action. I assure her that it is an indication of the resolution of the Government, the international community and the stabilisation force. We mean business. The people concerned all know what they have done and I wonder how they can sleep at night. They will certainly not sleep any more soundly in their beds as a result of today's action. We took serious action which was a declaration of intent. They should not miss that point. Dealing with other people outside that area is an issue which perhaps we should return to on another occasion.

Mr. Quentin Davies: This is unambiguously good news. The whole House will warmly endorse the tribute that the right hon. Gentleman has paid to the professionalism and courage of the British forces involved in the operation, which must have required great precision in planning and execution. Does the right hon. Gentleman agree that no system of justice, international or not, can continue to enjoy the public support on which it must rest if there is any suspicion that it shies away from apprehending those who are alleged to be leaders or the instigators of serious crimes? It would be devastating to confidence in the system of international justice if NATO left the area without the remaining 75 indicted war criminals to whom the right hon. Gentleman referred—particularly Mr. Mladic and Mr. Karadzic—having been arrested.

Mr. Robertson: I thank the hon. Gentleman for his support. The bipartisanship evident on this occasion will be recorded outside the House, including, I hope, by those among whom it might have some effect. The troops whom I visited in Bosnia were distinguished by their military skill and professionalism, and their outstanding commitment to rebuilding the area and establishing unity in a country that has not known it since the Stalinist oppression at the beginning of the communist era. That commitment shines through and should be recorded.
Of course, we cannot hope to establish a system of international justice if people who have been indicted for such terrible crimes never come to trial. That is why the resolution of the international community is on trial. There has been no attempt to shy away from the issues. We must always be conscious of the risks and dangers to our troops in any such exercises. We shall act resolutely when it is sensible and prudent to do so.

Business of the House

The President of the Council and Leader of the House of Commons (Mrs. Ann Taylor): Madam Speaker, I should like to make a statement about the business for next week.

MONDAY 14 July—Consideration of allocation of time motion relating to the Finance Bill.

Proceedings on the National Health Service (Private Finance) Bill [Lords].

TUESDAY 15 JULY—Consideration in Committee of the Finance Bill.

At 10 pm, the House will be asked to agree the summer supplementary estimates, which have already been laid.

WEDNESDAY 16 JULY—Until 2 pm, there will be debates on the motion for the Adjournment of the House.

Completion of consideration in Committee of the whole House of the Finance Bill.

THURSDAY 17 JULY—Proceedings on the Consolidated Fund (Appropriation) Bill.

Until about 7 pm, motion on the Council Tax Limitation (England) (Maximum Amounts) Order.

FRIDAY 18 JULY—Debate on the schools White Paper on a motion for the Adjournment of the House.

MONDAY 21 JULY—Second Reading of the Education (Student Loans) Bill.

The House will also wish to know that, subject to the progress of business—and this is subject to the progress of business—it is proposed that the House will rise for the summer recess on Thursday 31 July. I am not yet in a position to say when we will return in the autumn.

Mrs. Gillian Shephard: I thank the right hon. Lady for her statement.
Along with much of the rest of the House, I am amazed that the right hon. Lady and her Government should seek to impose a limit on the debating of the Finance Bill at this stage in its proceedings. Given that the Bill and the Budget have been lent such portentous significance by the Government, is it not inconsistent with that significance to cram consideration of those measures into a few days?
During last week's business questions, the right hon. Lady said:
The Government want to see as much transparency as possible in all areas."—[Official Report, 3 July 1997; Vol. 297, c. 424.]
It is becoming increasingly difficult to reconcile the right hon. Lady's actions with her words. Will she explain what contribution to transparency, in regard to very complex issues, her business statement represents? As she herself has said,
The quality of legislation can often be improved by consultation with informed opinion on both the substance and the drafting of legislative proposals.
Does she consider that aspiration to be met by what she proposes in practice—the allowing of just 12 working days between the publication of the draft Bill and the completion of its Committee stage? Do not her proposals demonstrate her Government's high-handedness and

disdain not only for the House, its Members and its procedures, but for all who have a legitimate interest in the Budget proposals?
The right hon. Lady should be protecting the rights and interests of Members, and the reputation of the House in the outside world. How can she reconcile the peremptory stifling of a legitimate debate on what she and her colleagues describe as measures of immense importance with the increasingly sanctimonious lectures about consultation that the country is having to endure from the Government? She has put herself into a ludicrous position.
Given the right hon. Lady's much-vaunted enthusiasm for transparency, and given the sadly contradictory statements that she and the President of the Board of Trade made from the Dispatch Box last week within an hour of each other, will she arrange an urgent debate on the current position of the Minister for Trade and Competitiveness in Europe, and on the precise issues on which he is permitted to act and speak? Will she arrange for the President of the Board of Trade to be present at that debate so that she can learn about her own Minister's position? Judging from all written answers to parliamentary questions, the President is confused about his position at present. Given its rapidly changing nature, that is perhaps understandable, but it is nevertheless inexcusable.

Mrs. Taylor: In answer to the right hon. Lady's final question, I made the position clear last week. The Minister concerned has followed "Questions of Procedure for Ministers", and he is not involved in any breach of its requirements. Inquiries have been made to ensure that that is the case, and what I said last week is correct.
On the question of the Budget, I must say that the Opposition have an incredible cheek. Let me give them some rather pertinent facts. First, it is a short Bill. It is less than half the size of last year's Bill and, pro rata, we are allowing more time for discussion. Secondly, we published the Bill in draft ahead of its formal publication, which was helpful. We extended the Budget debate to four days at the Opposition's request. In that respect, we have tried to accommodate all their requests.
We have ensured that the four big issues that the Opposition want to debate on the Floor of the House will be debated on the Floor of the House. We have also agreed to their request that the Committee considering the Finance Bill should have 35 members so that they feel that they have adequate representation.
The Standing Committee will be able to meet for 10 sittings. Last year, it had 14 sittings. This year's Bill has 53 clauses, whereas last year's Bill had 111 clauses. I also point out to the right hon. Lady that we shall provide two days on the Floor of the House to consider the remaining stages of the Bill. Last year, when the Finance Bill was much larger, the previous Government allowed only one day for consideration of its remaining stages.
Finally, Members will see from the Order Paper that the committal motion that we have tabled will be taken immediately after the Second Reading of the Finance Bill today. The motion was designed to meet the needs of the official Opposition that we heard about through the usual channels. A few hours ago, the Opposition changed their mind; therefore, we shall be moving an amended committal motion.
On all occasions, we have tried to meet the wishes of the official Opposition, but the simple fact is that they have refused to make any recommendations as to how much time is required in Committee. Pro rata, we are providing for more time than was allocated to last year's Budget. The Government are entitled to some certainty, given the fact that the Opposition cannot make up their minds on these matters.

Mr. Paul Flynn: When can we debate the contents of early-day motion 219?

[That this House notes with alarm that of the 600,000 people who were victims of pensions mis-selling, only 10 per cent. have so far been compensated; supports the Economic Secretary in her recent efforts to ensure that those pension companies which engaged in mis-selling are encouraged to settle matters of outstanding compensation without undue delay; supports Government measures to protect and help those who are victims of mis-selling; and calls on the pensions industry to ensure that such a situation as the mis-selling never happens again.]

The motion makes it clear that 600,000 people in Britain are still awaiting compensation because they were mis-sold personal pensions. Is it not a terrible scandal that companies with national names that are so well respected are behaving so abominably in terms of compensating their victims? They sell pensions, sometimes in a quarter of an hour, but it has taken them seven or eight years to compensate their victims. They move with the speed of a striking snake on speed when selling pensions, but when it comes to compensation their reactions are those of an arthritic sloth. Will my right hon. Friend make it clear to the House that the my hon. Friend the Economic Secretary to the Treasury will report on what progress has been made in compensating these unfortunate people?

Mrs. Taylor: My hon. Friend is quite correct to describe it as a national outrage and, as he says, hundreds of thousands of people are involved. Yesterday, my hon. Friend the Economic Secretary to the Treasury, who is on the Treasury Bench, made the first of what will be regular statements about the state of affairs in respect of action on the issue. She will review the position in the autumn and will make further decisions about what action is required as and when they are needed. Those involved in the pensions industry should be under no illusions. My hon. Friend will keep up her actions, as many people have waited too long for justice.

Mr. Paul Tyler: Reverting to the subject of the timetable motion, may I assure the Leader of the House that we on the Liberal Democrat Benches do not oppose in principle the programming of the legislation.

Mr. Dennis Skinner: However.

Mr. Tyler: Indeed, there are some advantages. One can ensure proper opportunity to debate all sections of important legislation and obtain proper consultation with outside interests, but—[Interruption.] I always like to oblige the hon. Member for Bolsover (Mr. Skinner).

The Budget, whether it has 53 clauses, 76 clauses or 176 clauses, is not a mini-Budget. This is not a mini-Finance Bill; it is a major Bill. I hope that the right hon. Lady will have proper regard to such considerations in the details of the timetable motion and, indeed, the timetabling of discussion in Committee, which will, of course, be equally important.
Has the Leader of the House checked that the Bill as it stands complies completely with the very tight constraints for a money Bill under section 1(2) of the Parliament Act 1911. If it does not, there could be major problems in the other place. Will she also address the question of Standing Order No. 50 in the other place? It is headed:
No clause to be annexed to a Bill of Aid or Supply foreign to the matte".
and states:
The annexing of any clause or clauses to a Bill of Aid or Supply, the matter of which is foreign to and different from the matter of the said Bill of Aid or Supply, is unparliamentary and tends to the destruction of constitutional Government.
Has she been briefed that the Bill as it stands completely and utterly falls within the natural constraints of a money Bill? If it does, all the issues of timetabling in this House could fall by the wayside. Is she confident that, if there is a delay in the other place, we can still begin the summer recess on the date that she announced?

Mrs. Taylor: Clearly, if there is a delay anywhere, we could not begin the summer recess on the date that I have announced. Of course, the Bill has been checked in the usual way and complies with all the regulations.
I turn to the scale of the Bill. It will bring some major benefits to many people and it is important that we should press ahead on that basis. We have agreed through the usual channels that what Opposition Members believe are the four main items will be debated on the Floor of the House. We have also been accommodating about the issues that should be taken in Committee. I think that we have been generous compared with other years in the total amount of time provided.

Mr. Dale Campbell-Savours: My right hon. Friend will know that one of our hon. Friends is bringing in a Bill on fox hunting, which many of us will want to support. Is she prepared to consider arranging a special debate on fox hunting in the next few weeks to enable us to put the case for the Select Committee on Agriculture to carry out an early and urgent inquiry into the whole question of fox hunting so that the many thousands of people involved may at least feel assured that their case has been heard in Parliament before we have legislated?

Mrs. Taylor: I can hold out no hope of a special debate on fox hunting of the kind that my hon. Friend wants.

Mr. Peter Brooke: The Leader of the House will understand that until we see the details of the timetable motion, we are dealing with shadows. I heard what she said about sittings, but it sounded to me as if there will be an acceleration in lapsed time, which puts a considerable strain on those interests in my constituency who will be wishing to advise on the Bill as it goes through


Committee. Was the Bank of England consulted on whether the accelerated process was sensible on so complex an issue?

Mrs. Taylor: I have no idea whether the Bank of England was consulted. I am not sure of the relevance to the timetabling of business in Committee. As I have said to Opposition Members, we published the Bill as early as possible in draft form so that extra consultation could take place over the weekend. In fact, we went further than usual because we published it on the Internet.

Helen Jackson: Did my right hon. Friend see an article in The Sunday Times that suggested that meetings were taking place between manufacturers of contraceptive pills and health Ministers that might lead to a prescription charge for contraception of up to £8 a month? Does she agree that many women throughout the country would be extremely concerned if such a charge were introduced? Will she take steps to ensure that Parliament is made aware of whether that is the intention of health Ministers?

Mrs. Taylor: There is no need to make Parliament aware of any change, because The Sunday Times report is wrong. No proposal has been made to stop free contraceptives and no meetings of the kind described in the article have taken place; nor are they planned.

Mr. Ian Bruce: In view of the decision to put a timetable motion on the Finance Bill, will the Leader of the House make time for a special debate on the windfall tax? I am especially concerned that the windfall tax could be applied to companies other than those mentioned in the Bill, including, for example, BP. Her noble Friend, Lord Simon, who is chairman of BP, will be able to tell her that part of the privatisation process for British Gas included the sale of its exploration interests to BP. which gained a large windfall from that purchase from the Government.
BP, Cable and Wireless, and other Companies could fall within the definition in schedule 1 to the Bill and that is so important to the stock value of so many companies—indeed, to the value of the shares that Lord Simon holds—that we should have a special debate on how the windfall tax will apply, to ensure that the definition that the Government believe they have a mandate for is properly applied.

Mrs. Taylor: I can confirm that the first debate on the Budget in Committee of the whole House will be on the windfall tax. There will also be provision for debate on the windfall tax in Standing Committee.

Mr. Dennis Skinner: I have heard some phoney arguments in my time, including those on the so-called guillotine on the Finance Bill. Some Tory Members have been running to the Table Office for several weeks to try to find out when the recess will begin so they can go on holiday, yet they are now complaining. I have a suggestion for my right hon. Friend. If the Tories are so keen on staying, we will stay beyond 12 August when the grouse season starts and then we will see what happens.
May I ask my right hon. Friend for a debate on air safety, because British Airways is now training cabin crews in a few days to man aircraft whose crews are

legitimately out on strike? For many people, flying is a nervous matter, and ill-trained cabin crews will make it even more frightening. We should have a debate so that all those matters can be aired.

Mrs. Taylor: I got the feeling that my hon. Friend was taking Members with him until be mentioned 12 August. The protests from Opposition Members have been somewhat half-hearted and, for some weeks, I have received inquiries from them about recess dates.
The British Airways dispute is not a matter for the Government. although we wish to ensure that all air safety requirements are met. We do not want passengers and those who are looking forward to holidays to be worried about air safety.

Mr. Tony Baldry: Does the Leader of the House agree that, to justify a guillotine motion, there must be some evidence or assumption that the Bill would otherwise be delayed? The right hon. Lady has made no such suggestion to the House and the only reasonable inference that can be drawn is that the Government are becoming increasingly embarrassed by their finance provisions. Doubtless, she will have seen today in the national newspapers that more than one commentator observed that the Prime Minister got into a terrible muddle yesterday on public spending. When one considers the inflation deflator, the much-vaunted £1.2 billion for the national health service—

Mr. Mike Hall: This should be about next week's business.

Madam Speaker: Order. I will determine whether a question is in order. I am waiting for the hon. Member for Banbury (Mr. Baldry) to refer to next week's business. The hon. Member for Weaver Vale (Mr. Hall) must allow me, as Speaker, to determine whether a question is in order. I understand that he is the Parliamentary Private Secretary to the President of the Council, and he should have more sense than to intervene during business questions.

Mr. Baldry: My point about next week's business—and this week's business—is simply this: clearly, the guillotine motion will be used not because the Opposition will obstruct the passage of the Bill but because the Government are frit at the proper scrutiny of their proposals.

Mrs. Taylor: I had not assumed that the Opposition wanted to delay the Bill. They were simply unable to tell us what time they wanted in Committee, and we cannot make decisions on that basis. Timetable motions are not used just to prevent delays and they can produce orderly debates. We have agreed with the Opposition our proceedings for debate on the Floor of the House to make sure that four main issues are debated. The timetable in Committee will be reached by agreement in the normal way. I would say to the hon. Member for Banbury (Mr. Baldry) that if we were frightened of debate on the issue, we would not have extended the Budget debate to four days and we would not have been so generous in the time we are allocating.

Mr. Andrew Mackinlay: May I ask my right hon. Friend whether we can have a debate before the


summer on the accelerated highways review, particularly in relation to the proposed widening of the M25 for over a mile without any hard shoulder? That proposal is bad for the environment and for transport, and if it were to be approved by the Government over the summer recess it would raise questions about the impartiality of the Government in relation to the terminal 5 public inquiry.
The Department of Transport has given evidence to the inquiry that the widening of the M25 is essential to terminal 5, yet, in replies that I have received, the Government say that they have a different view on the widening of the M25 in relation to terminal 5. It is time that this delicate matter—and the proposed terminal 5, which I abhor—was debated on the Floor of the House.

Mrs. Taylor: I am afraid that I cannot promise my hon. Friend the kind of general debate that he wants. He is a very experienced Member, who usually finds ways of raising the issues that he thinks should receive extra attention. I am sure that it has occurred to him that the usual three-hour Adjournment debate will take place on the Wednesday morning prior to the summer recess.

Mr. Peter Viggers: Surely the Leader of the House realises that there is considerable uncertainty in financial circles about the effect of advance corporation tax as it applies to foreign investors, and of foreign income dividends as they apply to companies with large foreign earnings. Surely she realises that this is important to those companies. It is not just a matter of how much time is provided in this House, but how much time is available for debate outside the House, so that those most involved can give a considered view and can advise us so that we can criticise the Finance Bill.
I raised the issue with the Economic Secretary to the Treasury, in relation to comments by the Paymaster General last Friday, and I see from Hansard that the reply was just waffle. It is not good enough for the Leader of the House to provide this foreshortened programme to consider such important financial measures.

Mrs. Taylor: I think that there is sufficient time to debate the issues that we are talking about. I have to say to the hon. Gentleman that the issue of advance corporation tax is not one which has been identified by the Opposition as an issue that should be debated on the Floor of the House. It will be for the usual channels to agree on the division of time to debate the issues in Committee.

Ms Helen Southworth: Along with many of my constituents, I am concerned about the promotion and sale of alcohol to children. I am aware that the Portman Group has set up a task force to look at this matter, but it is very important that the drinks industry does not target its marketing and sales on this vulnerable group of people. Will my right hon. Friend find time in the Government's busy programme for a debate on this issue?

Mrs. Taylor: My hon. Friend is right that this is a very worrying problem, and many parents in particular are concerned about the sale of alcopops. We welcome the Portman Group's attitude and the way in which it is looking into the problem, and we will study its findings in due course. There is a ministerial group looking at alcopops.

We are considering it in the context of under-age drinking in general. My hon. Friend made her point about the marketing issues well. Those are points which we would want to take into account.

Mr. John Bercow: May we have a statement from the President of the Board of Trade to explain why at last week's trade and industry questions she did not know the details of the possession of financial interests and their implications by the Minister for Trade and Competitiveness in Europe, even though he is a serving Minister in her Department?

Mrs. Taylor: My right hon. Friend the President of the Board of Trade and others, including myself, made it clear that there is no conflict of interest about Lord Simon and no problem about his shareholdings. He has complied with all the provisions of "Questions of Procedure for Ministers". I am sure that my right hon. Friend was aware of that.

Ms Beverley Hughes: Is my right hon. Friend aware of the emerging reports that some young people are combining Ecstasy and Prozac—apparently, Prozac intensifies and prolongs the effect of the Ecstasy. As general drug misuse is a serious problem in many constituencies and in the light of her role in co-ordinating the Government's initiative on drug misuse, can she provide an early opportunity for debating that serious issue?

Mrs. Taylor: My hon. Friend is right to say that that is another problem which causes parents and, I think, everyone throughout the country a great deal of concern. Taking any drug is risky. The safest option has to be not to take any drugs. Obviously, mixing drugs in the way that my hon. Friend described is extremely dangerous. We recently announced the grants to drug action teams to counter such problems. From what I have seen in the past few weeks, a great deal of positive work is going on to counter drug abuse and it is important that we all support those efforts to counter silly crazes of that type.

Mr. Nicholas Winterton: A few moments ago, the right hon. Lady talked about discussions through the usual channels relating to the timetable motion for the Finance Bill. Does she not have a duty to Back Benchers on both sides of the House and not merely to the usual channels? Does she agree that it is odd that a timetable motion should be a weapon of first rather than last resort, bearing in mind the number of questions that Opposition Members have asked on matters of great importance to my colleagues, which perhaps did not appear in the list of priorities of my right hon. Friend the shadow Leader of the House?
Is it not vital to have open government and transparency and to use a timetable motion as a weapon of last resort and not decide on one even before the Second Reading of the Bill?

Mrs. Taylor: I always thought that the hon. Gentleman was in favour of sensible timetabling on all Bills. If he has problems with the usual channels, that is a matter for the Conservative party. We have followed the normal procedures. I repeat that we did not lack generosity when it came to discussion of the Budget. We had four days for the Budget debate and we are having a Second Reading debate


and two days in a Committee of the whole House. There will be 10 sittings in Committee upstairs and then we are allowing two days for Report. I do not think that that lacks any generosity in terms of the time provided.

Helen Jones: Is my right hon. Friend aware of the deep concern felt by many Labour Members about the proposals set in train by the previous Government to reduce the number of Customs officers? In view of the serious implications of that proposal, particularly for the importation of illegal drugs, will she find time for an urgent debate on that matter so that those concerns can be raised on the Floor of the House?

Mrs. Taylor: The previous Government made such proposals. My hon. Friend the Financial Secretary to the Treasury, who has responsibility for Customs officers, has been concerned about the possible impact of those cuts. I have talked to Customs officers about their drug-related work and we attach great importance to that. We will have to await the outcome of further discussions, but I hope that we do not have to wait too long before a decision can be announced.

Mr. Malcolm Bruce: Will not the Leader of the House acknowledge that she is rather missing the point on the compressed timetable for the Finance Bill? The problem is not that she is not providing enough sittings in the House but that she is making a fundamental mistake: she is on the record as saying that the Bill is effectively a minor measure implementing the Labour party's manifesto commitments, whereas in fact it contains major proposals that were not in the manifesto and have considerable implications that, as Government Members' confusion shows, are not fully understood even by them. It is not possible for those affected to marshal the arguments between now and the end of the month.

Mrs. Taylor: I believe that many people have marshalled the arguments. People who operate in the sector are well able to work quickly. I did not say that the Bill had no major proposals—every Finance Bill will probably contain major proposals—but I said that it was half the size of the previous Finance Bill. I thank the hon. Gentleman for saying that we are allowing enough sittings on the Bill.

Mr. Andrew Love: Will my right hon. Friend find time to debate early-day motion 96?

[That this House notes the considerable pressure being applied to the Nationwide Building Society which is committed to remaining mutual to become a bank; further notes that this would threaten homeowners with higher mortgage interest rates and savers with lower interest rates; and calls for the mutual status of building societies to be respected and maintained to ensure that homeowners and savers have more choice.]

The motion concerns building societies and the future of the financial services sector. Building societies are under threat. Despite previous demutualisations, the existing building societies are committed to their current status. Mutuality brings stability, not to mention choice, diversity and much-needed competition, to the financial services sector. The matter is urgent and I hope that my right hon. Friend will be able to give us some time to discuss the implications for the health of the financial services sector.

Mrs.Taylor: I am aware that some people are concerned about developments in the area. We recently had an

Adjournment debate on this very matter. I appreciate my hon. Friend's concerns, but I do not think that it will be possible to find time at an early stage for the debate that he wants. I regret that.

Mr. William Thompson: The Leader of the House will be aware that there are motions on the Order Paper concerning the setting up of Committees of the House. When might they come up for consideration, and does she have any role in the composition of Committees? An examination of the names suggests that the Government have seven members on the Select Committees, and the Opposition four, which means that small parties such as the Ulster Unionist party are poorly represented. Will the right hon. Lady consider our objections?

Mrs. Taylor: The Committee of Selection made its nominations yesterday for a number of Select Committees. Those stand on the Order Paper and will be considered in due course. The composition of those Select Committees has been determined on a ratio, as is normally the case. There is nothing exceptional about the balance. Indeed, on several Committees the Government have, quite exceptionally, offered extra places on occasions, to ensure the best possible representation. If the hon. Gentleman has any other problems, he should take the matter up with the Chief Whip of the minority parties, who deals with such negotiations.

Mr. Lindsay Hoyle: Has my right hon. Friend heard the good news that the Germans have committed themselves to the Eurofighter? That is good news not only for Chorley but for the rest of the country, as it will safeguard 32,000 jobs. When can we expect a general debate on defence?

Mrs. Taylor: I know that my hon. Friend had a useful debate on the issue yesterday. It is slightly premature to say that the Germans have committed themselves formally to the Eurofighter, but the indications are positive. I am sure that he was pleased that my hon. Friend the Under-Secretary of State for Defence said yesterday that the Government were committed to the purchase of 232 Eurofighters. I am afraid that it will not be possible to have a more general debate before the recess, but I said last week that I hoped that we could have a defence debate before too long, and I hope that we will do that when we return in the autumn.

Mr. Nicholas Soames: Will the right hon. Lady reconsider an application that I made to her last week for a debate on the Budget leak that was so widely discussed in the Sunday newspapers? Opposition Members understand that there is always speculation about Budgets, but does she agree that it is plain—and everyone knows it—that there was a leak? Will she therefore assure the House that, instead of the frivolous answers given by the Prime Minister, there will be a serious inquiry into what is an extremely serious matter?

Mrs. Taylor: I do not think that my right hon. Friend the Prime Minister was frivolous. I do not accept the hon. Gentleman's basic proposition that there was a leak. As he said, there is always speculation about Budgets.

Mr. Paul Burstow: Will the right hon. Lady find time next week for a statement on the


Government's attitude to a decision on community care by the Law Lords that need is no longer the only basis for assessment? That has fundamentally changed our understanding of how community care should be assessed. As the Government last night failed to support in the other place a private Member's Bill introduced by Lord Ashley which would have returned the position to that understood by everyone for the past 27 years, we desperately need a statement. Many thousands of people outside this place rely on that legislation for support, and they no longer feel that it is there.

Mrs. Taylor: We all know that the funding of community care has always been a problem, both for local authorities and the Government, but I am afraid that I cannot hold out much prospect of a debate or statement. It would not be helpful to comment on a private Member's Bill in another place.

Mr. Mike Hancock: I am very grateful, Madam Speaker, for your patience in getting this far. I should be grateful if the Leader of the House could persuade her ministerial colleagues responsible for housing to table a motion before the recess in Government time to do something about the housing crisis faced by the nation and, in particular, by the city of Portsmouth, which I represent. Despite the fact that it has sold council houses and amassed a £50 million fortune, it is getting less than £1 million to tackle the serious issues that we face in a city where the housing situation is no better than it was 25 years ago when I entered local government there.

Mrs. Taylor: The whole House knows that we inherited many housing problems, but it also knows that we are very short of time before the recess. I cannot therefore hold out any prospect of the debate that the hon. Gentleman wants. We have, of course, made progress on the Bill to release capital receipts, which will be widely welcomed.

Sir Patrick Cormack: Is it not mildly ironic that when the House should be debating the timetable motion, the Select Committee on Modernisation of the House of Commons is supposed to be sitting upstairs? What really is the point of hon. Members giving their time and effort to try to modernise our procedures if the right hon. Lady anticipates things, rides roughshod over the House and gives the old meaning to the word "transparency"—that one can see through her?

Mrs. Taylor: If the Select Committee on Modernisation of the House of Commons makes progress, we may not need so many guillotines in future.

Points of Order

Mr. David Heathcoat-Amory: On a point of order, Madam Speaker. In answer to one of my hon. Friends, the Leader of the House said that we had not selected dividend tax credit abolition as a subject for debate on the Floor in Committee. If she were more familiar with the Bill that she is attempting to ram through the House, she would know that clause 19 deals with that subject and that we asked for it to be debated. In case she misled the House—inadvertently, I am sure—will she take this opportunity to correct herself?

The President of the Council and Leader of the House of Commons (Mrs. Ann Taylor): Further to that point of order, Madam Speaker. I was asked about advance corporation tax. I was not aware that that was one of the issues on which a debate had been requested. [Hon. MEMBERS: "They are the same thing."] If I was wrong, I apologise, but I thought that ACT and dividend tax credits were two aspects of a different problem.

Mr. Peter Viggers: Further to that point of order, Madam Speaker. I am the hon. Member who asked the question. I specifically asked about ACT and foreign dividends.

Mrs. Cheryl Gillan: On a point of order, Madam Speaker.

Madam Speaker: Is it related to the previous matter, which was not a point of order but a point of information? I will take only points of order.

Mrs. Gillan: It is a point of order of which I gave you notice earlier. It relates to the abuse by the President of the Board of Trade of the Standing Orders of the House. In the 1997 edition, under Standing Order No. 22(4), a Minister is required to give an answer on a named day. Earlier this week, I tabled six simple questions on matters of fact. I received six answers on the board yesterday which read:
I will reply to the hon. Member as soon as possible.
That is not the spirit of the Standing Orders. When the President of the Board of Trade does not even know fully about the interests of her Ministers, do you agree that when we table questions that ask for answers by a certain date, she should at least have the courtesy to reply in full, rather than fobbing Members off with answers because she finds the answers too difficult to give?

Mr. Dale Campbell-Savours: On a point of order, Madam Speaker.

Madam Speaker: Order. I am on my feet.

Mr. Campbell-Savours: It is on this matter.

Madam Speaker: I am on this matter. The hon. Lady may not like the answers that she has received, but they are in compliance with the Standing Orders of the House.

BILL PRESENTED

EDUCATION (STUDENT LOANS)

Mr. Secretary Blunkett, supported by the Prime Minister, Mr. Chancellor of the Exchequer, Mr. Secretary Dewar, Secretary Marjorie Mowlam and Dr. Kim Howells, presented a Bill to make further provision with respect to public sector student loans: And the same was read the First time; and ordered to be read a Second time tomorrow, and to be printed [Bill 44].

Orders of the Day — Finance Bill

Order for Second Reading read.

The Chief Secretary to the Treasury (Mr. Alistair Darling): I beg to move, That the Bill be now read a Second time.
This is a further day of debate on this year's Finance Bill. We have had a four-day Budget debate. We had a day's debate yesterday effectively on the Finance Bill, in Opposition time, and today is the Second Reading debate. We have a further two full days on the Floor of the House next week and thereafter the Bill will go into Committee.
I spoke at some length on Monday evening and yesterday. I hope to be comparatively brief today, consistent, of course, with my obligations to introduce the Bill in the House. The Finance Bill implements the Budget introduced by my right hon. Friend the Chancellor last week, which set out the priorities for the Government and the people of Britain. The Finance Bill is designed to equip Britain for a long-term future and to ensure that everyone can share in higher living standards and greater job opportunities. It implements a Budget which looks to the long term rather than to the short-term interests that have been pursued in the recent past.
In the 10 weeks since we came to power, we have set out a clear strategy for achieving a prosperous and secure future for everyone. The Budget implements several measures that are a key part of that strategy. It is a Budget for economic stability. First and foremost, we wish to put an end to the repeated cycles of boom and bust. As we said earlier this afternoon in Question Time, we have inherited a fundamental weakness in the British economy. The Budget and other measures seek to put the country on a stable footing. We have tightened fiscal policy. We have set tough new rules on public borrowing and debt which build on other changes such as setting up the Monetary Policy Committee under the Bank of England to help enable us to meet our inflation target of 2.5 per cent.
This is also a Budget for investment. Along with stability, investment is a key to our economic success. It needs to be long-term investment. As my right hon. Friend the Chancellor has said before, at this stage in the economic cycle, investment levels ought to be far higher. They are lower than in many competitor countries. So the Budget and the Finance Bill include fundamental changes to the tax system, as well as targeted measures aimed at encouraging investment in business.
Our future depends not only on investment in business but investment in the people of our country as well as its infrastructure. My hon. Friend the Paymaster General has made major and far-reaching reforms to the private finance initiative, the fruits of which we are already beginning to see.
In particular, the Finance Bill introduces measures and programmes to get the young unemployed, the long-term unemployed and lone parents back into work. That is a fundamental part of our Budget strategy and part I of the Finance Bill implements it. Both measures are aimed at modernising the welfare state. If we are to have a stable


and prosperous future that is shared by everyone, we need to do far more to get people from welfare into work and to change the culture of the country.
The Budget is also about fairness, to which we are committed. The decisions that we have taken in the past few weeks, not least to reduce VAT on domestic fuel, which will help many poor people as well as many of the elderly, will demonstrate to people that this is a fair Budget. Part of the finance to pay for that cut has come from the abolition of tax-favoured treatment of private medical insurance, which benefited just a few people.
The Budget also protects the environment. High and stable levels of growth and employment must be achieved by environmentally sustainable means. The protection of the environment is at the core of the Government's tax objectives announced in the Budget.
My right hon. Friend the Chancellor has set out a strategy for stability, long-term investment, modernisation of the welfare state and a lair tax system. The Bill implements that strategy.
Before I discuss the Bill in detail, I should just like to say a word about the procedure that will be followed, about which there was much comment during business questions, which have just ended. My comments are directed not only to the House but to those who follow our proceedings and read accounts of them, because it is important that they, too, appreciate the position.
The length of the Budget debate was agreed through the usual channels, as was the start date for the Committee stage. We also agreed to the Opposition's request for a Committee of 35 members, which is quite large. Unfortunately, it was not possible to agree to an end date for the Committee. For that reason, we had no choice but to table a guillotine motion. It is in no one's interests that uncertainty should continue beyond the summer recess, and it is in everyone's interests that the Finance Bill should become law by August.
The Bill is short—less than half the length of the one produced last year. I acknowledge that it contains some controversial measures, but there is ample time for the Standing Committee and the House to consider amendments next week, although I am not aware that any amendments have been tabled so far.
The Standing Committee will meet for live days and have up to 10 sittings. Last year, it had 14 sittings, but the Bill was double the size of the current one. We have been more generous in our allocation of time than the previous Government. It may not have been apparent to Conservative Members as they sat in their ministerial offices, but, having endured 10 years in opposition. I am not aware that the then Government ever extended to us, the then Opposition, the courtesies that we are now extending to the current Opposition. We have endeavoured to co-operate at every single stage. It is a matter of regret that the Treasury Whip has been unable to pursue discussions with his opposite number about the timetable during the Committee stage. That, after all, would enable Conservative Members to discuss the very issues that I know that they and outside interests want to discuss.
We have seen what happened to our provisions to scrap the assisted places scheme and our proposals to allow a referendum on Scottish devolution: Conservative

Members used the tactic of filibustering. We therefore have every right to be concerned that if we do not take action to ensure orderly debate, many of the controversial measures that concern people inside and outside the House may not receive the scrutiny that they deserve.
Some of us remember the Finance Bill of 1992, when the then Government imposed a guillotine at a similarly early stage in the proceedings. They did so to ensure that we did not reach the new clauses and our motion to reduce the rate of VAT. There is therefore a precedent for our action.
Conservative Members may wish to recall that between 1979 and 1997 the Government used the guillotine 82 times on 61 Bills. I therefore repeat this offer on behalf of the Government: we are prepared to co-operate in the time allotted to ensure that those details of concern to hon. Members on both sides as well as to outside interests are dealt with satisfactorily. However, if Conservative Members are interested only in filibustering, I am sorry to say that they are letting themselves down as well as those who have every right to expect that the Opposition oppose Bills responsibly, as Labour Members did over the past few years.
We are anxious to establish economic stability.

Mr. Peter Lilley: The right hon. Gentleman said that in 18 years a total of 61 Bills were guillotined, which is an average of just over three a year. The current Government have guillotined three Bills in two months. That is a big difference.

Mr. Darling: I am not sure what point the right hon. Gentleman is seeking to make. During the 18 years in which the Conservatives were in power they used the guillotine on 82 occasions. Without wishing to digress too far from the Finance Bill, it was essential to get the measure to allow a referendum on Scottish devolution through to enable people in Scotland to have the opportunity to vote this autumn. Had Conservative Members wanted to discuss that matter seriously, they could have done so. Instead, we had a series of ludicrous amendments, which were obviously designed to waste time. The same was true of the debate on the assisted places scheme.
I repeat the offer that I make on behalf of the Government. There are important measures in the Finance Bill and if any hon. Member wants to table amendments, we want to facilitate that discussion. I hope that, as a result of the measure we are taking next week, when we will arrange for the Bill to be debated in an orderly manner, there will be plenty of opportunity to discuss that detail in a manner which, most importantly, is appreciated by those who will be affected by it.

Mr. James Clappison: rose—

Mr. Darling: I do not wish to speak for too long, but as the hon. Gentleman is becoming so distressed I do not wish to prolong his agony.

Mr. Clappison: I am not distressed. The right hon. Gentleman referred to the Bill to scrap the assisted places scheme. I should like him to take into account the fact that the Government tried to take it through its Committee stage in one evening, but, as a result of the valuable


debate that took place, it emerged that the Government were breaking one of their promises. As a result of that valuable debate, the Government had to change their mind and make some concessions to try to keep their promises.

Mr. Darling: This Government do not break their promises. I popped into the Chamber during that debate because I wondered what on earth was going on. It was perfectly obvious to me that Conservative Members were engaged in a good old-fashioned filibuster—a tactic which many Oppositions have used in the past. We are anxious to ensure that the Finance Bill is properly scrutinised. In terms of the time allocated and the length of the Bill, our arrangements are generous compared with what happened in the past.
One of the Government's central objectives is to achieve a degree of economic stability that we have not seen in this country for many years. As I and others have said, it is surely the central objective of any Government policy to obtain long-term economic stability to allow individuals and businesses to plan for the future, to invest and save. We have taken a number of measures to achieve that stability in the domestic market.
Clauses 15 and 49 of the Bill, for example, will implement measures that we believe will calm the housing market. No one wants to see a return to the so-called Lawson boom of the late 1980s, for which many Conservative Members must bear some responsibility. It led to an unsustainable boom, which was followed by one of the deepest recessions in our country since the first world war. As a result, many people, having bought their houses, have been unable to sell and recoup the losses that they had made. My right hon. Friend has therefore taken the necessary steps to ensure that the housing market does not get out of control as the Conservatives allowed it to do in the late 1980s.
As I have said, we want to encourage long-term investment, and a number of measures in the Bill will enable us to encourage that process. They must be taken together with the steps that we took early on entering office when we handed operational responsibility for setting interest rates to the Bank of England. The confidence that inflation and long-term interest rates will remain stable and low, so that firms can make long-term investments, is extremely important. In order that firms can retain and invest many of the profits that they earn, clause 18 of the Bill cuts the main rate of corporation tax to 31 per cent. That measure is accompanied by provisions to reduce the small companies' rate of corporation tax to 21 per cent. It is a major step in the right direction and has been widely welcomed.
As has been discussed at great length in the House—I dare say that hon. Members will want to scrutinise the subject in Committee—we are also introducing measures to remove the distortion in the tax system, whereby a company that retains its profits for reinvestment is taxed at 33 per cent. but if the money is paid out to a pension fund it is effectively taxed at 16 per cent. We believe that investment decisions should be taken by businesses, not the tax man. Part III of the Bill aims to put that right.
There are other measures to encourage investment. Clauses 42 and 43 introduce a temporary doubling of the allowances for investment in the next 12 months—they are targeted particularly on small and medium-sized businesses. As a result, £230 million less tax will be paid

by business than would otherwise have been the case. I should have thought that all hon. Members would welcome that proposal at this stage in the cycle when investment levels are far lower than one might reasonably expect.
On top of that general investment incentive, for the first time, clause 48 introduces a special regime for British films. The British film industry has undergone something of a renaissance in the past few years. British sites are being used for filming, not least in my constituency and in my street. Over the past couple of years, many films have been made and have brought great benefit to this country. I hope that hon. Members will support our measures.
The Budget also sets about modernising the welfare state. That was a fundamental part of our election approach and was set out in our manifesto. The new deal for the unemployed will be financed by a windfall tax on the privatised utilities, which is implemented in part I of the Bill. I am not sure whether the Tories still oppose that part of the Bill as they have not mentioned it recently. In case they do, I remind them that it is an important part of any Government's strategy. We must change the culture of this country whereby many young people feel that they have no obligation to society and no chance to contribute and believe that they live in a country from which they are effectively excluded. It is essential that young people be given the opportunity to train and to work to improve their qualifications.
As we have said often before, in a world where capital is increasingly mobile, the skills and training of the work force will mark us out as a place to invest. The private utilities were sold far too cheaply and the windfall tax has been pitched at exactly the right level, as subsequent events have borne out. Above all, we must remember that the proceeds of the windfall tax will be an investment for the future.

Mr. Malcolm Bruce: The Chief Secretary is setting out a long-term objective with which many of us would agree and we hope that he and his Government succeed in fulfilling it. Will he acknowledge, however, that there is a short-term tension at the heart of his proposals? The Government are taking not only £5 billion in the windfall tax but, if they succeed in getting the Bill through the House, an additional £5 billion from advance corporation tax relief while, by their own admission, they are tightening still further the public spending squeeze. The Scottish Office figures show that there will be a real cut of £126 million this year and £25 million next year. The Chief Secretary and the Chancellor of the Exchequer are both Scottish Members. Can the Minister explain how the short-term needs of the public services in Scotland can by met? Would it not be sensible to use some of the revenue that he is bringing in at least to maintain the real value?

Mr. Darling: Even before the Budget, my right hon. Friend the Secretary of State for Scotland announced a significant reordering of spending priorities within the Scottish Office to enable it to help—for example, through the rough sleepers initiative and housing measures. As I keep telling the hon. Gentleman, although he does not appear to listen, the real-terms increase in health and education spending, as well as the windfall tax proceeds


which will be used to improve schools, will be of significant benefit to the Scottish Office and the people of Scotland, as well as to the whole country.
The hon. Gentleman says that it is all very well for the Government to consider the long term, but what about the short term? If he were standing here in my position, what would people make of his strategy? He seems far more concerned about today and tomorrow and will not lift his eyes to see that unless we solve the long-term problems, we shall never resolve the short and medium-term problems. Part of the problem that we face as an incoming Government is that it is obvious that the outgoing Conservative Government never looked to the long term.
Every day, I go into my office in the Treasury and I wonder whether or not Conservative Ministers knew that they were never coming back. We are having to pick up the consequences of decisions that could never have been taken by people who expected to be returned to office. When they left, there was something about their mental state—they knew that they would not be coming back and we have had to pick up the pieces. Across the board, we are introducing measures to stand this country in good stead in the long term.
The subject of fairness may be something of a puzzle to Conservative Members, but others may wish to listen. Fairness is an essential component of any tax policy. It is for that reason that we are reducing VAT on domestic fuel to 5 per cent. The Conservatives wanted to put it up to 17½ per cent., which would have hit many of the most vulnerable and poorest people in this country. Is it not ironic that one of the measures that the Conservative parry wants to discuss next week is our measure to remove tax relief on private medical insurance? Although that tax subsidy existed for six or seven years, the number of people who took advantage of it never changed: it was a subsidy for people who already had private medical insurance. It is obvious from the Conservative party's stance that it was far more concerned with the few people who would benefit from that relief than the many who will benefit from our measures to reduce VAT. That is why we make no apology for removing the relief. Governments should give reliefs only where they are justified and where they will benefit the majority: they should not give a relief to people who will behave in the same way whether or not they receive it—as happened with the private medical insurance subsidy.
We are introducing other measures to close tax loopholes—something to which we have always attached great importance. All those who exploit loopholes should be on notice that we intend to take a firm line; clause 26 and clauses 44 to 47 begin that process. As my right hon. Friend the Chancellor said, the Inland Revenue is carrying out a wide-ranging review on tax avoidance with a view to introducing legislation in future Bills. It is also considering the case for a general anti-avoidance rule.
Another important issue is the protection of the environment—something that is often talked about, but on which few Governments take action. The previous Government made some welcome steps which we are carrying forward. As the Red Book made clear, we believe that there is a role for the tax system to discourage behaviour that damages the environment and, equally, to encourage behaviour that is good for the environment. Clause 11 increases the rate of tax on hydrocarbon oils.

Clause 12 increases the duty on tobacco, for which we make no apology. It is important to deter people, especially young people, from starting to smoke. It is intensely depressing to travel up and down the country and see that smoking among young people appears to be becoming more prevalent.
By now, the Finance Bill will be familiar to the House and to many people outside it. As I have said, we are happy to debate the detail of the Bill as thoroughly as possible. We believe that its central measures are important for the long-term good of this country. More importantly, they implement the promises that we made at the election. We have kept our faith with the British people, which is something that many in this country will welcome.

Mr. David Heathcoat-Amory: Contrary to the rosy picture presented by the Chief Secretary, the country is beginning to pay the bill for a Labour Government. The rhetoric of the Budget has given way to the reality of an unnecessary and tax-raising Finance Bill. The Government have been in office only 10 weeks, but the cracks are already appearing.
The first thing the Chancellor did—almost on the first day he took office—was to hand decisions about interest rates over to the Bank of England. He cannot hand over responsibility for monetary policy, but decisions are now to be taken by others. A little later, he relaxed the inflation target. We met our inflation target of 2.5 per cent. or less by the election. That was the achievement of my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), who never relaxed his determination to get inflation down permanently and to meet our inflation target by the date of the general election. He did it.
The new Chancellor loosened the inflation target to an aim of 2.5 per cent. a month with a 1 per cent. tolerance either side of that target before various letters and explanations are to be demanded from the Bank of England. That sent a clear message to the markets, to economic participants and to the world at large that Labour Governments are soft on inflation. They always have been in the past and this one is no different. That was confirmed in the Budget arithmetic published last week as part of the financial statement. The higher prediction for inflation is built into the plans, so the Chancellor expects to break his own inflation target. I do not know whether that should be the subject of a letter he writes to the Bank of England or whether the Bank of England should write to the Chancellor, but it is clear that inflation is set to rise this year and next and it is written into the Red Book.

Mr. Darling: Can the right hon. Gentleman tell us whether the Opposition believe that the Bank was wrong to raise interest rates today?

Mr. Heathcoat-Amory: We would not have relaxed the inflation target or given away decision making about monetary policy to the Bank of England. We would not have introduced a Budget that will increase inflation. If the Government will address all those issues, we will tell them what we might have done in the hypothetical situation about which the right hon. Gentleman asks.
The Chancellor could have done something about inflation in the Budget. I do not know whether there are some neo-Keynesians in neo-Labour, but there are those


who believe that tax increases should be used to regulate the economy. I am not sure that I am one of them, but there is a view that excessive consumer expenditure can be damped down in a Budget. The Chancellor could have done that, but, instead, he chose to hit not consumers primarily, but savers, pension funds and utility companies. To that extent, it was a missed opportunity.
The Chancellor increased some taxes on consumers directly and, to that extent, contributed directly to inflation. He increased indirect taxes on tobacco and fuel. He put up the duties on petrol, diesel and heating fuel immediately, bringing forward those increases by five months. That netted him an extra £750 million in the current year, but it goes straight on to the retail prices index.
It should not go unremarked that the tax increases—17 in all, including the indirect tax increases—make it a regressive Budget. The Institute for Fiscal Studies has calculated that the poorest 10 per cent. will be hit hardest by the tax changes that have been announced. so before Labour Members become all sanctimonious about how only they look after the poor and the disadvantaged, they should reflect on the fact that they are being invited to approve a regressive Budget.
Faced with the fact that the Budget and the Finance Bill have relaxed the inflation target, that the Red Book predicts that the Chancellor will miss his own inflation target and that the Budget has not only failed to deal with inflation but has added to it, the Bank of England has now raised interest rates again—the third increase since the election.
The verdict of the Monetary Policy Committee was that 6.5 per cent. was adequate a few weeks ago. Having studied the Budget and the Bill, it now evidently concludes that an extra 0.25 per cent. is needed. That is the result of the first 10 whirlwind weeks of the new Government.

Mr. Darling: I am sure that the right hon. Gentleman did not mean to mislead the House on that point. The Bank of England's report today notes the fiscal tightening in the Budget last week and further notes that the problems have arisen over a long period. Will he accept that the former Chancellor was advised on many occasions, specifically in February, that if he did not take action to increase interest rates he would not hit the target in the long term?

Mr. Heathcoat-Amory: Of course the Chancellor attempted a fiscal tightening in the Budget, but I have explained that the targets he hit on the revenue side of his Budget were not directly consumers, but pension funds, savers and businesses and that the extent to which he did put up taxes has had an inflationary effect. The Bank of England must have taken all that into account before deciding on a third increase in interest rates since the election.
After that 10-week period, we are left with higher inflation and more to come, higher interest rates and higher taxes. Of course, we had a stock market rally, but before the Government take too much comfort in that they should see what it consisted of. Retailer and bank shares were up, but the shares in manufacturing and engineering companies and exporters were down. Is that what the Chancellor meant by rebalancing the economy?
This was not a Budget for investment. Yes, corporation tax came down a little for businesses that are incorporated, but we know that most small businesses are not incorporated. There were some short-term increases in capital allowances, but nothing for the long term. The point is that all that was overwhelmed by the sum that the Chancellor is taking out of the corporate sector. One cannot take out a net £3 billion from British companies and expect them to increase their investment plans. That is what the Budget did and now the interest rate increases make the message even clearer. It will be more expensive to invest and the strength of the pound means that exporters will find things even worse. The message is clear—Labour is bad for business.
The central claim of the Budget is that it is for the long term. That was supposed to be the Budget's hallmark. The first item in the Finance Bill is the windfall tax. I do not know whether that is supposed to be long term or whether there are to be other windfall taxes. If participants in the private finance initiative do too well out of a deal, I wonder whether there will be a windfall tax on them. If the Government try to privatise London Underground or air traffic control services, I wonder whether there will be a windfall tax if the shareholders do too well. Perhaps that is what the Government mean by making the windfall tax long term. The only sense in which the tax covers a long period of time is that it is retrospective to the extent of 13 years to find the profits that the Government want to tax. They want to spend the money not in the years stretching ahead, but in short-term employment subsidy schemes.
Already the tax is in a muddle. We were told by the Paymaster General on Friday that he had made some mistakes about how the tax was to be calculated and that he would bring forward an amendment. He told hon. Members that they should not worry as it was only a small matter. Well, it is not a small matter when the Government use the coercive powers of taxation against a group of British companies that they have singled out for allegedly making excess profits and then fail to table the correct way of doing it and expect us all to work it out from some elliptical remarks by the Paymaster General on a Friday morning.
It is disgraceful that the Government are rushing through a Bill that they prepared in only a few weeks without any regard for the principles of openness or consultation and without the publication of draft clauses—about which they made so much in opposition. Then, they talked about the importance of improving legislation by consulting those affected and by publishing draft clauses and so on—but all that has been forgotten. They published some sort of a draft Bill over a weekend and they think that it is a substitute for all the things that they urged on us when they were in opposition.
The proposed timetable is a disgrace. This is a colossal tax-raising Budget which includes 17 tax rises and a huge, new, complicated tax. The schedules that deal with the windfall tax alone run to 15 pages. Pages more deal with anti-avoidance legislation. All that is to be forced through in short order. There is to be a guillotine even before the Committee stage has started. That has not been provoked by any filibustering; there has been no attempt to disrupt the Bill. It is simply that the Government want to push it through and get away for their summer holidays.
Realistically, there is no opportunity for outside bodies, tax institutes, professional bodies and those affected by the Bill to contribute to the Committee stage. I understand that the Committee is to sit on successive days. whereas usually Finance Bill Committees sit two days a week. That should worry Labour Members because they were sent here to scrutinise the Executive. They are supposed to look carefully at the legislation on which they will be voting. They have a duty to ensure that the legitimate points made by outside interests are considered.
We have already heard from the Paymaster General that there is something wrong with the clauses dealing with foreign income dividends. During questions earlier, the Chief Secretary said that it had all been made clear last Friday. I looked up exactly what the Paymaster General said about foreign income dividends:
We are also looking sympathetically at the position of UK-based groups with a substantial amount of foreign income."—[Official Report, 4 July. 1997; Vol. 297. c. 586.]
He said nothing else—there was no clue as to whether he intends to withdraw the clause or change it.
We have heard that the Treasury has received telephone calls from British companies with large amounts of foreign earnings. They say that if the Government persist with the clause as drafted they will simply relocate to other countries. That would blow a hole in the Government's claim of making Britain the number one magnet for foreign investment—as, in fact, it was under the Conservative Government.
I hope that the Minister who is to reply to the debate will make clear the Government's position on foreign income dividends. Picking up stray comments from the Government, it appears that there is something wrong and that the Bill on which we are being invited to vote this evening does not reflect the Government's current view on foreign income dividends. If that is so, we should be told that before, rather than after, we vote on Second Reading.
There is one group outside the House whose voice has been heard and who are now clear about where they stand with the Government. All the people who are building up pensions and saving and investing for the future now know that they have been robbed by the Government. The evidence is overwhelming.

Mr. Gareth Thomas: rose—

Mr. Heathcoat-Amory: Perhaps the hon. Gentleman wants to give us some examples.

Mr. Thomas: Does the right hon. Gentleman accept that his party's claim, rather late in the day, to be the pensioners' champion is regarded by many older people as extraordinary effrontery? It lies uncomfortably with reality and with the previous Government's record, which included, among other things, the imposition of value added tax on domestic fuel—something which hit pensioners very badly.

Mr. Heathcoat-Amory: Yes, there was some mis-selling of private pensions if the hon. Gentleman is referring to that. When we were in government, we put in place procedures and mechanisms to put that right. That

does not justify the wholesale mis-selling of pensions now being attempted by the Government. People—I am sure that the hon. Gentleman is familiar with such cases—who were quite properly advised to leave the state earnings-related pension scheme and take out a personal pension did so on the basis that the personal pension offered a better prospect. Along come the new Government and remove the main prop from under personal pensions and render invalid, retrospectively, the original calculation. That is mis-selling pensions on a truly colossal scale and I am surprised that the hon. Gentleman appears to condone it.
Millions of pensioners now realise how badly they have been let down. A 30-year-old who has been contributing to a pension scheme will now have to put in, on average, an additional £20 a week to maintain his benefit, yet the Financial Secretary—and I keep returning to this point because it has not yet been corrected by the Government—told the House last week that there was no problem. She said:
The measure is good for pensions and pensioners, not bad for them … People should understand that our reforms will benefit pension funds."—[Official Report, 3 July 1997; Vol. 297, c. 507.]
We will continue to quote the hon. Lady because she was speaking on behalf of the Government, on behalf of the Chancellor, on behalf of the Cabinet and on behalf of the Labour party. If she really meant what she said, how does she reconcile her words—which are clearly erroneous—with the Finance Bill's attack on pensions and pension funds?
On Budget day, the Chancellor thought that he had discovered a victimless crime. He thought that he had discovered a tax that no one really paid. In reality, by the changes to advance corporation tax and the associated tax credits, he is imposing a savings tax on the British people. He has been found out.
It took the Government only a few weeks to break their election promises. They promised not to increase taxes, but they have. In particular, they made great play of the assertion that ordinary people would not be taxed. As the Government have now discovered, ordinary people have pensions. It might have come as a surprise to them to learn that. Millions of ordinary people have done what successive Governments of all parties urged them to do—provide for their old age either by taking out personal pensions or by entering contracts with company pension schemes.

Mr. Darling: I think that the right hon. Gentleman was a Treasury Minister in June 1993. Does he remember sitting in the Finance Bill Committee with the right hon. Member for Chamwood (Mr. Dorrell) who, when justifying the proposed reduction in tax credits in Norman Lamont's Budget, said:
We needed to raise revenue in a way that did least economic damage.
He said that they would do so from pension funds
from a group of people with taxable capacity, but who are not taxpayers, in a way that does minimum economic damage."—[Official Report, Standing Committee A, 15 June 1993; c. 377.]
Did the right hon. Gentleman disagree with that statement? I do not remember his leaping to his feet to do so or walking out of the Committee. If he thought that


that was a raid on pension funds, why did he not object? Was that, perhaps, what prompted his ultimate resignation from the Government?

Mr. Heathcoat-Amory: Cannot the right hon. Gentleman see the difference between a 5 per cent. reduction in advance corporation tax credits, bringing the rate down to what is now the lower rate of income tax, and the total and immediate abolition of all such credits, which is what the Government are trying to do? It is a body blow for the entire pensions industry.
In recent days, Labour Members have complained about our use of quotations from radio and television in which Ministers have denied that they have tax-raising ambitions. I do not think that they can deny a sentence in the Labour party manifesto, which states:
we will support and strengthen the framework for occupational pensions.
How on earth can the Government reconcile that with the fact that they are now knocking away the income stream on which such pensions rely? How can they support occupational pensions by removing £5 billion a year from them?
The issue of local authority finances also has not yet been resolved. Earlier in the week, we learnt that the Local Government Association had written to Ministers about the issue. The association said that, in its opinion, the Government's action will cost their members at least £300 million a year and that that money will have to come out of local authority services if it is not made up by the Government. I again ask Ministers whether they are content for services to be cut or whether they will compensate local government. They have agreed to compensate charities for the effects that the same tax changes will have on charitable income.
My county, Somerset, calculates that it will have to find an additional £1.2 million a year to plug the gap in its pension fund. As it is expected to be rate capped—an issue which we will soon debate—there is no prospect of that burden being unloaded on to council tax payers. The money will have to come directly out of services.
In mitigation, the Government pretend that the problem can be ignored and rolled forward into some valuation that, they say, will occur in two years' time.

Mr. David Heath: Will the right hon. Gentleman give way?

Mr. Heathcoat-Amory: In a moment. The hon. Member for Somerton and Frome (Mr. Heath) has some relevant experiences and will confirm that the Somerset revaluation is currently under way. It would be entirely irresponsible for the county—part of which I represent—to hope that, in a few years, a Labour Government will compensate it for an expenditure backlog on that scale.

Mr. Heath: I am grateful to the right hon. Gentleman, who also represents a Somerset constituency. I entirely agree with his statement that the revaluation will have a severe effect on Somerset. Does he accept that that is one of the unavoidable costs that the county council will have to meet and that it should provide a very strong argument when it makes its case to the Government not to apply

rate capping to Somerset? Will he join whole-heartedly his Somerset colleagues in ensuring that that argument is made very clearly to Ministers?

Mr. Heathcoat-Amory: The hon. Gentleman is attempting to join two separate issues—whether Somerset should be rate capped for the generality of its expenditure and whether it should be reimbursed for the new impost, which is a direct consequence of the Budget. I will certainly support the county that we both represent in the second of those tasks.
The Budget raises other issues. Withdrawal of tax relief on health insurance is a mean measure which will hit about 600,000 people who will be thrown on to the NHS as additional patients if they cannot now afford that insurance. They will therefore add to pressure on health expenditure, although there will be no more money for health—which brings us to another issue in the Finance Bill. Not only will no more money be allocated to public services, there will he less money.
At Question Time, the Chief Secretary evaded that issue and the questions asked of him, although the matter can be put quite simply. Because of the additional inflation that the Government are building into their projections, the costs of public services are set to rise. Ministers, however, are saying that services, although they may be more expensive, will not receive more money from the Government. There will therefore be less to spend on health care, social security, the environment, the police and all other services.
Independent commentators have calculated from figures in the Red Book that, this financial year, the squeeze on all public expenditure will be equivalent to a £3 billion reduction in public expenditure, rising to £5.25 billion next financial year. The squeeze will not be altered by the Government's irresponsible pre-allocation—from the reserve that they inherited—to two items of public expenditure, health and education. Regardless, the pre-allocation will not come into effect before April 1998.
The pre-allocation is a camouflage and creates an even more savage squeeze on all the other public services. The Government have made much of openness and of the public's right to know, but, mysteriously, no chart in the Red Book makes that effect clear. The Red Book was supposed to be a user-friendly document. It now has a political slogan and some pictures on its cover, but it does not come clean about the true effect of the Chancellor's announcement on public services. I therefore hope that the Minister who replies to today's debate will tell us unambiguously whether it is true that—starting now, because of the additional inflation to be built in to the economy—the United Kingdom faces a real and savage squeeze on all public finances.

Mr. William Cash: Does my right hon. Friend agree that it is absolutely essential not only to receive answers to his questions but to be told the reasons behind the Government's decisions? Is he not tempted to imagine that the Government are perhaps attempting to subscribe to the Maastricht criteria, and that that is why they are getting themselves into such intense difficulty? Furthermore, does he think that that will come back to haunt them once the public discover that they have been


deceived by Ministers into accepting a series of public expenditure cuts to comply with the principle of economic and monetary union? Ministers will not deny it.

Mr. Heathcoat-Amory: I always admire my hon. Friend's ingenuity in inserting a European aspect into any debate. He has made some effective points in his own way.
Last week, after the Budget, Labour Members were waving their Order Papers. However, I think that it has now sunk in—certainly among the public, and perhaps among Labour Members—that, in the Budget and the Finance Bill, not only have the Government broken their promises but there will be no more money for public services.
Some hon. Members are probably thinking that the Chancellor will have to give way on public expenditure. That is very old Labour thinking and I hope that they are cautious about expressing it too openly in the presence of a Labour Whip. If more money does come their way, it will simply mean that the Government have broken another promise. Not only will they have increased taxes and inflation, they will have broken their promise to bear down on the public finances.
We are witnessing a collision between the most successful economy in Europe, which the Conservatives created, and a Labour Government who have not a clue how to run that economy. The Finance Bill embodies broken tax promises, higher inflation and, above all, the shameful and unnecessary attack on millions of people who thought that, in pensions funds, they had found a way of providing for themselves and their families in the long term. It is a shameful Budget and a bad Finance Bill, which I hope the House will reject.

Mr. Nigel Beard: Thank you, Mr. Deputy Speaker, for giving me the opportunity to make my maiden speech in this debate.
My constituency of Bexleyheath and Crayford is the London constituency that is furthest east on the south bank of the River Thames. Dartford lies to the east, and the London borough of Greenwich lies to the west. The A2, the main trunk road between London and Dover, forms the southern boundary. The River Thames, which is the northern boundary, is bordered by the flat open expanse of the Crayford marshes.
There are close ties with neighbouring areas of Kent. Indeed, in the past, gipsies from Kent and surrounding areas have regularly congregated on Crayford marshes. One of my predecessors, the late Norman Dodds, was known as the gipsies' Member of Parliament.
Many residents of Bexleyheath and Crayford were born and brought up close to where they live now. They work in one of the small or medium-sized businesses in the London borough of Bexley or commute to central or other parts of London. There are four railway stations in the area—Crayford, Slade Green, Barnehurst and Bexleyheath—on lines that connect London with various parts of Kent.
William Morris, the 19th-century pioneer of designs that are still popular a century after his death, was a resident of Bexleyheath. His house, aptly named the Red house, still stands as memorial to a man who was not only a poet, designer and business man, but a pioneer socialist.
Another of the area's famous sons, by adoption, is the Father of the House, the right hon. Member for Old Bexley and Sidcup (Sir E. Heath). He began his long and distinguished political career in 1951 as the Member of Parliament for Bexleyheath, an area now largely in the constituency that I have the honour to represent. The start of his political career hung by a very fine thread with a majority of 113 over the sitting Labour Member of Parliament, with a communist candidate getting more than 400 votes. No doubt before too long, one can expect an academic paper entitled "Britain in Europe: the Effect of the Communist Candidate in Bexleyheath in 1951".
The defeated Labour candidate was Ashley Bramall, who went on to have an impact on education in London as the chairman and leader of the Inner London education authority over 20 years. He contributed to my campaign, and was pleased to see the seat return to Labour for the first time since he won the by-election in 1947.
I hope and intend to increase the frequency of Labour's success in this area from once every 50 years to once every four or five. I am sure that the Budget presented by my right hon. Friend the Chancellor of the Exchequer will set a course to make that virtually a certainty.
I had two immediate predecessors—Sir Cyril Townsend, the Member for Bexleyheath, and Mr. David Evennett, the Member for Erith and Crayford, who fought the general election. Sir Cyril entered Parliament in 1974 after worldwide service in the Army. That was echoed in his interest in foreign policy during his period as a Member of this House.
Mr. David Evennett came to Parliament in 1983, having spent periods teaching and at Lloyd's of London. He continued his interest in education as a member of the Select Committee on Education, Science and the Arts between 1986 and 1992, and he was a regular visitor to schools in the constituency of Erith and Crayford. He was an active member of the congregation of St. Paulinus church. It comes hard, after 14 years in the House, to face unexpected defeat. The grace with which David Evennett accepted that and wished me well as his successor was widely admired on election night and throughout the constituency.
The Budget's emphasis on help and encouragement for small and medium-sized businesses is very relevant to Bexleyheath and Crayford. What has happened to manufacturing industry in the area typifies what has happened nationwide over the past 20 years. There were several major engineering companies in the area—Vickers, Fraser and Chalmers and, not far away, the Woolwich arsenal. All have closed, and now the economy depends on small and medium-sized businesses and on commuting.
There is a lack of skilled employment opportunities in an area where many families traditionally saw sons following fathers into engineering apprenticeships. We have to regenerate opportunities for people to use their skills and talents to the full. Unless we do that, we shall not raise the long-term rate of economic growth of the country as a whole and, individually, people will not realise the standard of living that they aspire to and will lack the satisfaction of having their abilities fully and usefully employed.
The majority of new opportunities are likely to come from small and medium-sized businesses which, in order to expand, require stability of economic outlook,


well-trained employees and investment. On all three counts, the Budget and the Finance Bill hit the nail on the head.
A greater proportion of small and medium-sized companies need to be based on high technology so that they can compete internationally. In that context, 1,000 people employed with a bike, a bucket and a ladder, to quote the phrase that my hon. Friend the Member for Bolsover (Mr. Skinner) used recently, is not the same as 1,000 people employed in trail-blazing electronics or biotechnology companies.
The keynote of the Budget is to raise business investment and thereby raise the level of economic growth. That is right. That investment needs to go into capital equipment for manufacturing industry where, during the 1980s, the rate of depreciation of capital was faster than the rate of renewal. In other words, the capital base was wasting away.
There is also a need to raise the level of investment in civil research and development. Reputable studies have shown that, in any country over any reasonably long period, 60 per cent. of the growth in gross domestic product depends on the use of capital and labour, but 40 per cent. depends on technological progress. That is effectively confirmed by a report of the Organisation for Economic Co-operation and Development, which concluded that the differences between the economic growth rates of member countries could be explained almost entirely by differences in the level of investment in research and development.
Those are clear pointers as to what the United Kingdom needs to do to pull itself up the economic growth league. But only two weeks ago, the Department of Trade and Industry published the "Research and Development Scoreboard", which showed that the trend is entirely in the opposite direction.
In 1996, the ratio of research and development spending to sales in the UK was lower than in any other major industrialised country. Among the top 300 companies in the world that spend on research and development, the average ratio of research and development spending to sales was about 4.3 per cent.; for British companies in that 300, it was about half that average, at 2.3 per cent., and the trend was downwards.
Nothing much has changed, therefore, since the House of Lords Select Committee on Science and Technology's report in 1991 concluded that British businesses gave dividends priority over capital and research and development investment to a far greater extent than any other member of the OECD. In the early 1990s, Britain's average dividend yield was 40 per cent. higher than in the United States of America, 150 per cent. higher than in Germany and 10 times the level in Japan.
The Government have had the courage to address a fundamental, long-standing flaw in the British economy by encouraging the redirection of profits away from overlarge dividends into research and development and capital investment.
The Budget will not solve the problems of British industry and the British economy at a stroke, but it makes solutions possible. The issues are not new. They have been reviewed, reported on and discussed for years, but they have been either dealt with by ideological incantation or ignored as if relative economic decline were inevitable. The Bill marks the end of ideological illusion and

defeatism and the beginning of an era of innovation and renewal—a turning point that I am proud to be in the House to support.

Mr. John Townend: I congratulate the hon. Member for Bexleyheath and Crayford (Mr. Beard) on his excellent maiden speech. His comments about his constituency were illuminating, and my hon. Friends and I appreciated his kind words about his numerous Conservative predecessors. I was friendly with David Evennett and was sad to see him go. Sir Cyril Townsend caused me some problems. With a difference of only one letter between our names, our mail was frequently sent to the wrong place. Given that I am on one wing of the Conservative party and he was as far the other way as was possible without being in the Labour party, that sometimes led to embarrassing situations. I wish the hon. Gentleman a happy five years in Parliament. I hope that he finds it an enjoyable experience. Without prejudging the result of the next election, we hope to see a Conservative back next time.
I listened attentively to the Budget and have gone through the Bill carefully. I congratulate the Government on pulling off the most successful confidence trick in politics this century. Only eight weeks ago, they succeeded in convincing a large number of electors that new Labour really was different—that Labour had changed its spots and was no longer the high-tax party. To achieve that aim, it undertook to maintain our tax and spending totals for two years. It said that it would not raise direct tax rates and implied that there would be no overall rise in taxation apart from the windfall tax.
I warned the electors in my constituency not to believe Labour. I warned them that their mortgage interest tax relief would be at risk and that their pensions could be at risk. However, because the Labour party placed such great emphasis on trust, many people believed the Labour candidate rather than me, and my majority, like those of many other Conservatives, went down substantially.
Within only eight weeks, that trust has been shattered. The Government cannot use the argument that the financial situation that they found when they got into power was worse than they anticipated. Government revenue forecasts are constantly increasing. The public sector borrowing requirement forecast has fallen since the election.
I did not read Labour's manifesto during the election campaign, but I have it with me now. Did Labour tell pensioners eight weeks ago that there would be a triple whammy against them? Not at all. My right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) read out part of Labour's manifesto comments about pensions. It goes on:
Personal pensions, appropriately regulated, will remain a good option for many.
What about the three whammies? The first was the ending of tax relief on health insurance for pensioners. There was nothing in the manifesto about that. In the previous two years, Labour had talked about it, as it talked about many other policies, such as all the expenditure increases that it would implement. I attended and spoke in all the debates on public expenditure in that period. Like so many other policies, Labour dropped that one before the election and did not put it in the manifesto because it thought that it would lose it votes.
The Minister for Welfare Reform, who is looking at pension problems in detail, has my greatest respect. At a time when we want to encourage increasing numbers, particularly of old people in our growing population, to provide for their pensions, is it not stupid to reduce that tax relief? If old-age pensioners have to give up their insurance, they will add to national health service waiting lists.
The second whammy against pensioners was the windfall tax. I was intrigued that the Chancellor said in his Budget speech that the windfall tax would not affect investment, prices or services. How can it be paid for? It can be paid for only by reducing dividends. Who are the biggest shareholders in the utilities and the privatised companies? The pension funds. Much of the cost will have to be paid for by future pensioners.
The third whammy was the removal of tax credits on dividends under advance corporation tax, which will take at least £50 billion out of pension funds over the next 10 years. The windfall tax is bad enough, but that lasts for only one year. The changes in ACT will continue to siphon money from pension schemes year after year. That will mean lower pensions or higher contributions. For personal pensions, the whole burden will fall on the person who has taken out the policy. For company pension schemes, the company has the alternative of topping up pension funds, but that means more money, which will have to come from the investment pot. Is not that a stupid policy, when demographic changes will mean a significant rise in the number of people drawing pensions during the next 20 years?
It had been generally accepted before the Budget that we needed to encourage more private provision, not less. This country has benefited enormously from not having the dead weight of pension liability building up which many of our European partners have. It really sticks in my throat that the triple whammy on pensions comes from a party that was telling my constituents at the general election that their pensions would not be safe under a Tory Government. What hypocrisy.
Did the Labour manifesto tell home owners that within eight weeks there would be a triple whammy against them? Home owners should not have been surprised, because the Labour party has never been the party of home ownership. It has always been the party of the council estate. We have had three interest rate rises since the election. Mortgage rates have gone up and will continue to go up. The second whammy is the cut in mortgage interest tax relief by one third. The third whammy is that many people who want to repay their mortgages with an endowment policy will find that it is likely to fall short of what was expected because of the changes in ACT. That means that many borrowers will end up with a shortfall if they do not increase the premiums that they pay.
Did the motorists who voted Labour believe that they would receive a double whammy within eight weeks? First, there was a large rise in petrol tax—the second in a year, following the annual increase. The Government tried to excuse that second rise on environmental grounds, but we all know that that was nonsense. We all know now that unleaded petrol causes more damaging emissions into

the atmosphere than leaded. Then there was the second whammy—at least another £20 per year in insurance premiums.
Did all the smokers who voted Labour know that they would be hit again by a particularly vicious rise in tobacco tax? Were they told that by the Labour party manifesto? I consider that tax rise particularly silly: all that it will do is encourage smuggling, which is already having a serious effect on the legitimate tobacco and drink industries. I speak as someone who has been involved in those industries throughout my life.
None of those tax rises was spelt out in the Labour party manifesto. Why? Because the Labour party knew that, if it had spelt them out, it would have lost an awful lot of votes. This Finance Bill destroys Labour's claim that it is to be trusted, and its claim that it is no longer the high-tax party.
I have serious doubts about whether the welfare-to-work policy will work. It certainly will not create a net increase in real jobs, although there may be substitutions and short-term employment. I do, however, welcome the proposals to take benefit away from the idle and the work-shy—I think it right for us to say when we approve of Government action. One of the previous Government's failings was that they were far too wet in that regard. I advocated such a policy from the Back Benches many times—as the hon. Member for Gordon (Mr. Bruce) knows—but, if our Government had introduced it, can hon. Members imagine the furore that would have resulted on the Labour Benches?
One of the principal causes of the underclass and welfare dependency, which worries us all, is the increasing number of unmarried women who are producing an increasing number of children. In this day and age, there is no need for that. The Government should give notice that, after 12 months, no payments will be made to new claimants. Those concerned would have the options of contraception, adoption, abortion or staying at home with mum, rather than being kept by the taxpayer. Any Government who had the guts to do that would see a dramatic reduction in the problem over the following five years.
Hon. Members laugh, but I well remember what happened in 1979, when our party suggested that we should stop paying social security benefits to strikers. We were attacked as being inhuman. We pushed the measure through, and in the following five years, the number of working days lost through strikes fell dramatically.
There were cheers from the Government Benches when the Chancellor announced increased spending on education and the national health service next year. There was nothing for this year. The Treasury did not raise any extra resources, however; it merely raided the contingency fund to the tune of £2.2 billion for the year 1998–99. To take nearly half the contingency fund nine months before the start of the financial year is to create a hostage to fortune, or a fiscal time-bomb that is ticking away.
What will happen if another crisis such as the bovine spongiform encephalopathy crisis comes out of the blue? Where will the cash come from? Where will the cash come from to pay the public sector costs of a minimum wage? What will happen if the pay review boards recommend higher pay increases than are allowed for in the Government's departmental budgets? Nurses, teachers, doctors and local government workers should


beware: there will be no extra wages for them, although they were led to expect that a Labour Government would be much more favourably disposed to their demands.
What about the increase in the inflation rate that my right hon. Friend the Member for Wells mentioned? In the past, many Departments received extra money from the contingency fund to cover inflation levels that were higher than had been forecast, but there will be no more money there, so deep cuts in public expenditure will be necessary. The only solution is another significant tax rise next year, in the Government's second Budget.
The Budget is supposed to be about creating jobs, but it will do the opposite. It is supposed to be about creating investment, but it is taking £2.3 billion from industry generally and another £3.5 billion in windfall tax this year alone. That will result in a fall rather than a rise in investment. It is not possible to take £5.8 billion from pension funds and industry and expect it not to affect investment.
The Budget is a short-term Budget, crafted to prompt cheers from new Labour Members on Budget day. The Bill increases taxation by stealth, raiding pension funds; the Budget hits pensioners, home owners and investment. I forecast that, in a year's time, it will be seen to have been a Budget of missed opportunities, and the fiscal time-bomb will explode.

Mr. Keith Darvill: Thank you, Mr. Deputy Speaker, for allowing me to make my maiden speech on the Second Reading of the Finance Bill. I congratulate my hon. Friend the Member for Bexleyheath and Crayford (Mr. Beard) on his thought-provoking maiden speech.
I have the honour to represent Upminster, which is in the London borough of Havering, on the east side of Greater London. I am the first Labour Member to represent the constituency, which was formed following the boundary reorganisation in the early 1970s. I also have the pleasure of living and working in the constituency.
Let me take this opportunity of thanking my predecessor, Sir Nicholas Bonsor, for his public service during his time as Member of Parliament for Upminster. Sir Nicholas represented the constituency for 15 years, from 1982. Before that, from 1979, he represented Nantwich. His predecessor was Sir John Loveridge, who represented the constituency from 1974 until 1979.
Between 1995 and the general election, Sir Nicholas Bonsor was Minister of State at the Foreign and Commonwealth Office, and he was well known in the House for his work as Chairman of the Select Committee on Defence between 1992 and 1995. He assisted many constituents during his 15 years representing Upminster. During the election campaign—which was conducted in accordance with the best of our traditions—he was both fair and honourable, and he was particularly gracious in defeat. I wish him and his family well for the future.
My constituency includes the towns of Harold Hill, Harold Wood, Emerson Park, Cranham and Upminster. Most of the residents of the area have come from the inner part of east London or are members of families born there. They are part of the well-known eastward drift that has taken place since the 1920s. Those families have returned to Labour and have given me the honour of representing them in Parliament. I shall always be grateful for their trust and support.
Let me briefly describe my constituency. It is bisected by two road arteries from London, the A12 and the A127. In many ways, those roads act as natural barriers to close integration between the communities that make up the constituency. The M25, which traverses the eastern and northern boundaries of the constituency, provides excellent access to the motorway network, but it has its down side: there is a good deal of noise pollution, which mainly affects residents of east Cranham. More needs to be done to limit noise pollution from our motorways where they are located close to housing estates. I am sure that many other constituencies suffer similar problems.
The constituency is also bisected by two main railway lines, the London-Tilbury-Southend line and Great Eastern Railways, which serve Upminster and Harold Wood stations respectively. They provide important links to the centre of London and surrounding parts of Essex and East Anglia. Upminster is also served by the London Underground District line and is its eastern terminus.
In addition to its fame for being at the end of the District line, Upminster is the home of the world famous Travel Club of Upminster, a long-established family tour operator whose reputation is envied within the industry. Many other small and medium-sized businesses are based in my constituency and I know that they welcome many of the provisions in the Finance Bill.
The constituency has many tine schools and a general hospital at Harold Wood which require additional funding to maintain and improve the standards that my constituents rightly demand.
Large numbers of my constituents commute into the City of London, and the rail transport and road links with the centre of London are a primary concern to them. They know the importance of a strategic authority for London and an integrated transport policy.
Harold Hill deserves a particular mention. Locally, it is known as "the hill". It is a fine housing estate providing many good homes. Harold Hill was planned and developed for the London overspill after the second world war. The estate was designed chiefly by the former London county council. The advantage of good-quality social housing with gardens and plenty of green open space should never be ignored by our town planners.
As a consequence of the previous Government's housing policies, however, waiting lists for rented homes are far too long. Many of my advice surgery cases relate to housing and I believe that the phased release of capital receipts will go some way towards alleviating the problem.
My constituents' concerns are similar to those described in many maiden speeches in the past nine weeks or so. Those concerns were raised time and again during the general election campaign. They relate to education, health, unemployment, housing and the decline in public services delivered by the local authority.
I shall now make some specific points about the Finance Bill, which will begin to address my constituents' concerns. First, I congratulate my right hon. Friend the Chancellor of the Exchequer on his Budget, which is sensible, prudent and innovative. Above all, it honours election pledges. It contains many specific proposals that I applaud, particularly the welfare-to-work programme, which has signalled the reversal of our economic decline. They have particular relevance to the unemployment blackspots in my constituency which are mainly in the


Harold Hill area. The wards of Hilldene, Gooshays and Heaton are particularly badly affected. The reduction in VAT on fuel and power will be of particular benefit to many pensioners in my constituency.
The previous Government's policies failed the nation because, among other things, they were short term. The distinguishing feature of the Budget and the Finance Bill is that they lay down foundations for the long term. The changes in corporation tax will encourage the retention of profits for investment. The abolition of payable tax credits removes a bias in the tax system in favour of distribution rather than retention of profit for investment.
The Budget will not be the disaster that Opposition Members are predicting. The doubling of capital allowances will encourage small and medium-sized businesses to invest at an important point in the economic cycle, and the provisions relating to housing are in stark contrast to those introduced by the Conservative party in government. We should remember the problems caused by the changes to MIRAS in the 1980s, which affected many of my constituents. As a solicitor dealing with property matters, I often had to advise clients on problems caused by negative equity, which created many difficulties and contributed to the previous Government's unpopularity, particularly in my constituency.
Above all, the Government's plans for education are the best example of the long-term thinking that is crucial to our future and is essential if the nation is to recover and make the necessary improvements in living standards and public services for all our people. The provisions relating to the windfall tax, corporation tax and capital allowances are designed for the many and not for the few, in contrast to the provisions in previous Finance Bills in the past 18 years.
The policies will help to deliver the growth that is required to ensure that, in the medium and long term, our education and health services have the increased resources that are so essential and which the electorate endorsed resoundingly at the ballot box.
I have no hesitation in supporting the Second Reading of the Bill and commending it to the House.

Mr. Edward Davey: I congratulate the hon. Member for Upminster (Mr. Darvill) on a very interesting maiden speech. I have often taken the District line in the direction of Upminster, but, unfortunately, I have never made it to the end. Having been encouraged by his speech, if I have enough time on my hands, perhaps I shall make that journey. As a fellow London Member, I look forward to working with him on various issues that concern his constituents and mine.
The Chief Secretary to the Treasury spent some time at the beginning of his speech trying to assuage hon. Members' concern about the speed at which the Government are trying to push the Bill through the House. Like the right hon. Member for Wells (Mr. Heathcoat-Amory), the Liberal Democrats are concerned by the Government's unseemly haste. Despite having a mercifully small number of clauses compared with recent Finance Bills, the Bill contains major tax changes. It raises significant new sums and is the backbone of a dramatic shift in fiscal policy. It is not a trilling measure.
Earlier today, the Leader of the House announced that there would be a high number of sitting days. That is welcome, but it does not overcome the problem that there is a need for calendar time in which to consider the Bill. Advisers and interest groups outside the House need time to reflect on the detailed changes that it introduces and proposed amendments to it. They need time to assist right hon. and hon. Members between sittings. Although we welcome the provision of extra sitting days, the lack of real calendar time to examine the measure remains a problem.
Ministers may claim that the Budget proposals were foreshadowed in the Labour election manifesto. That is true in respect of the windfall tax and certain other proposals, but the major changes to corporation tax, MIRAS and other excise duties were not in the Labour manifesto. The Government have not argued the case for those taxes before the British electorate, so they are duty bound to argue them before the House. That necessitates providing sufficient parliamentary and calendar time.
I understand that it was the usual practice for the Second Reading debate to take place several weeks after the Budget resolutions had been passed, not three days later. That normally provides the opportunity for outside bodies to comment on the tax proposals outlined in detail in press releases and allows the Treasury and Civil Service Select Committee to cross-examine the Chancellor, his officials and other commentators and present its report to the House prior to the Second Reading debate. The haste with which the Government are pursuing the Bill has prevented that from happening. The Government's failure in that respect is preventing proper and thorough scrutiny of a major piece of legislation. That is bad news for the House, bad news for companies and individuals, and ultimately, it will be bad news for the Government.
Such a bitter pill might have been easier to swallow if the Government had announced a new era of glasnost in the Treasury and said that, in future, they would produce a draft Budget so that people could comment on it before the Chancellor came to the Dispatch Box.

Mr. Tim Boswell: Preferably before the election.

Mr. Davey: Indeed so.
If the Government had announced that, in future, they would consider separating major tax changes announced in the Budget from the detailed technical refinements that annually augment the Finance Bill, that might have assuaged some of our concerns for the future. It is because they have failed to do so that we on the Liberal Democrat Benches are left feeling extremely wary. We genuinely regret such a failure, because, despite our genuine willingness to scrutinise the Bill in the spirit of constructive criticism, the Government are preventing us from doing so.
Ministers may be tired after the election, desperate for the recess and dreaming of their Tuscan holiday or their Dordogne retreat, but if the statute book is left riddled with errors, it will haunt their Red Boxes when they return. I urge the Economic Secretary to the Treasury at the very least to give an undertaking that the manic attempt to legislate even faster than the Government's predecessors—the sort of post-election Prozac trip that they seem to be on—will not be repeated.
What of the contents of the Finance Bill and the related Budget? Frankly, the details that have come out in the past few weeks show that the Bill is disastrous—disastrous for the companies whose investment plans will be hit by the taxes; disastrous for the public services whose budgets will be slashed by the spending total; and disastrous for our economy, whose recovery will be unbalanced by the macro-economic framework.
I say that with genuine sadness and disappointment. At 3.45 pm on 2 July, it was difficult not to be impressed by the sight of the Chancellor standing up to address the House. After 18 years of Conservative chicanery, it was not difficult to hope sincerely that we were about to hear something different, radical, innovative. Instead, we had a Budget—and now a Finance Bill—designed for political considerations, not economic ones, and aimed at fulfilling a political project and building a war chest for the next election, not at directing the economy and meeting our society's needs. That is why Liberal Democrat Members will vote against the Second Reading.
Today is, of course, an historic day, with the Bank of England raising rates independently of the Government for the first time since the second world war. The Liberal Democrats greatly welcome that development and it is essential that, at this early stage, Ministers openly and publicly endorse the Bank's decisions and the aim of low inflation.

Mr. Quentin Davies: This is the second time that the Bank has raised interest rates independently.

Mr. Davey: The hon. Gentleman, who made that comment from a sedentary position, is wrong. The Chancellor directed the previous rise following the election. This is the first time that interest rates have been raised independently.
It is right that Ministers should welcome the rises, because they, along with the right hon. and learned Member for Rushcliffe (Mr. Clarke), are to blame for them. The former Chancellor must share the blame, for if he had raised interest rates well before the election, as the Bank then proposed and as my hon. Friend the Member for Gordon (Mr. Bruce) had suggested, the consumer boom, which is threatening to get out completely of hand, would be much milder.
The right hon. and learned Member for Rushcliffe has made great play of how he got it right and Eddie got it wrong, but I am afraid that history and events are increasingly on the Governor's side, as past economic growth figures are adjusted upwards. showing that the economy was growing faster than previously thought.
Likewise, the Government are not without responsibility. A tight fiscal policy skewed to hit the consumer might have helped to tame sterling and reduce the need for higher interest rates. Instead, we have a tight policy that is skewed on business and the public services.
The right hon. and learned Member for Rushcliffe and the Chancellor can of, course, take joint responsibility for so much of today's economic policy, particularly the Government's spending plans. It is quite astonishing that an incoming Government should be so willing to accept the overall spending totals of their predecessors—not just for one year but for two years. At times, it is like a throwback to the 1950s and 1960s, when Conservative

and Labour spokesmen on the economy last agreed so firmly on economic policy. The consensus between Rab Butler and Hugh Gaitskell at that time led to the term "Butskellism" being coined. Since Clarke is so closely parroted by Brown, perhaps we should have a new "-ism" in British political vocabulary. I suggest the term "Clownism".
Some would say that Clownism is particularly appropriate given the ridiculous and somewhat laughable plans for public spending of both the former and the present Chancellors. Such spending plans are increasingly seen as totally incredible by the City and other commentators. Let us take Goldman Sachs, where I believe Ministers have a friend or two. Its Budget analysis says:
In our forecasts we assume that the pressures to increase public spending are sufficiently great for the Chancellor to be forced to breach the control total this year and next. Specifically, we assume that the control total overshoots by £2 billion this year and £8½ billion in 1998/9.
People do not believe the Government's Red Book. Who can blame them? Who can blame the teenage scribblers for not believing the Government? I cannot remember any Labour politician during the election campaign calling for massive cuts in public spending, yet the Red Book says just that. Higher inflation forecasts have made nonsense of the cash planning totals of the right hon. and learned Member for Rushcliffe, yet the Labour Chancellor is determined to stick by them—pure Clownism.
When Liberal Democrats dared to point out the arithmetical fact that the totals for 1998–99 show a real-terms cut of more than £5 billion, we were described by an anonymous Labour spokesman as "economically illiterate". Yet, judging by die Prime Minister's answer to my right hon. Friend the Member for Yeovil (Mr. Ashdown) yesterday, it is the Prime Minister who is economically illiterate. If he really does not understand the effect of inflation on the purchasing power of money, I would urge the Chancellor and his friends to explain the concept to him at the earliest opportunity.
I know that the Chancellor and the Chief Secretary to the Treasury understand the concept. Indeed, in an intervention on my hon. Friend the Member for Gordon earlier this week, the Chief Secretary to the Treasury said:
the health budget will increase in real terms by 2.24 per cent. next year".—[Official Report, 7 July 1997; Vol. 297, c. 658.]
We welcome that modest increase, but we should like to know the real-terms figures for all other areas of spending, such as the police, pensioners and social services. The fact is that there will be savage real-terms cuts across the board at a time when most public services are already at breaking point.
What the House really needs to know is where the cuts will be made and how they will tally with Labour's election promises. For example, in order to make the cut of more than £125 million in its budget, the Home Office would have to axe 6,250 police officers. Is that what Ministers have in mind? If so, what has happened to their manifesto promise to
get more officers back on the beat"?
Will the implied £35 million real cut in planned overseas aid for next year be implemented or will Labour Ministers keep their manifesto pledge to
reverse the decline in UK aid spending"?
Which is it to be? The reality of Clownism, as practised by the new Treasury team, will inevitably be cuts in all Departments or massive overshooting on public spending totals and public sector borrowing.
There is all this pain on spending, yet taxes are being hiked so much by the Bill. Significant increases in company taxation, which the Bill introduces, are always an easy way to raise funds. It is the equivalent of cutting capital expenditure in the public sector. No one notices at first because the trouble sets in down the track.
Firms will complain, but the effect overall is fairly marginal—except for that one marginally profitable investment decision which now will not go ahead, or that one firm whose increased tax liability takes it over the edge into bankruptcy, or that marginal employee, to whom some firm, somewhere, would have given work, but now will not. Whether it is the £5 billion raised from the privatised utilities or the next £3 billion raised from corporate tax changes, the effects will be damaging to investment and jobs. It is simply staggering that Ministers are trying to claim that that will not be so.
I will spare the House yet another speech on why the windfall tax is wrong in principle and what damage will be wreaked by the abolition of the advance corporation tax credit, except to say that it is astonishing that Labour Ministers, in defending the two largest tax rises of the Budget, have continually referred to occasions when previous Conservative Governments have used the same devices. That justification by reference to Conservative policies worries me. Is it another example of Clownism?
We would have liked to see some smaller tax measures in the Budget specifically to undo some of the more recent Conservative tax legislation. The first is the phasing out of tax relief for profit-related pay. While it was certainly true that the relief was being widely abused and needed substantial reform, the previous Government threw the baby out with the bath water when it pushed through complete abolition. I urge Ministers to consider ways to identify genuine schemes that deserve the relief. Many employees earning modest incomes in companies such as The John Lewis Partnership are being badly hit by the withdrawal of the relief.
Distinguishing the good from the bad may be beyond even the craftiest of Treasury mandarins, but there are relatively painless alternatives, such as reintroducing the relief capped at a lower ceiling of, say, £1,000. That would help many people.
The second tax measure that Liberal Democrats would dearly like to see implemented in the Bill is a reduction in VAT on energy-saving materials. To us, it seems ludicrous to tax environmentally friendly products more heavily than the actual use of energy. While my colleagues from the previous Parliament tell me that the reduction might cause a few red faces on the Government Benches, the green tinge that the measure would add might more than offset such embarrassment.
The third tax measure that we would ask Ministers to reflect on is insurance tax. The Finance Act 1997 created a damaging anomaly under which insurance policies sold by some businesses, such as travel agents, are taxed at 17.5 per cent., but policies sold by others, such as independent insurance brokers, are taxed at only 4 per cent. As was widely predicted, that has naturally hit the profits of many small travel agents. It cannot be right that the tax system deliberately hinders one type of business vis-a-vis another. If we do not want to see yet another

range of small, independent businesses disappear from our high streets, the Minister should incorporate that minor change in the Bill.
I also urge Ministers to look afresh at business taxation, taking a wide definition of business taxation and including the uniform business rate and the way in which the self-employed are taxed. Liberal Democrats are keen to see the replacement of the UBR with a fairer tax based on land values or, in the interim, a major change in the way in which the UBR is levied, including the valuation system that underpins it; the impact on smaller firms; and the incentive impacts for business and, in particular, retail location.
We should like to see the reform of national insurance contributions for the self-employed. Why do the smallest of our firms have to pay class II national insurance contributions? It is a poll tax against small firm creation. The administrative nightmare caused by class II contributions, coupled with their disincentive effects, surely rates them as a plausible candidate for abolition.
Ministers may be becoming wary of announcing reviews, but I strongly urge them to do so for business taxation. Given the swingeing increases they have announced for business in the Bill, a review would be doubly appropriate. Indeed, I argue that the Bill's tax rises for business constitute one of the two key weaknesses in the Budget strategy—the other being the inflation tax on our public services.
When the Chancellor decided on his macro-economic strategy, he must surely have considered the impact on investment of his corporate tax plans. When he painted a picture of strong consumer growth, coupled with a slightly faltering manufacturing sector, and when he talked so much of the need for investment and stability, why did he produce tax proposals that will take so much from the corporate sector and so little from consumers?
The Budget was not just one of the fabled double whammies—it was a triple whammy on business. Before the Budget, exporters were hit by the high pound and the Budget did nothing to correct that. In the Budget, firms were hit by the taxman. After the Budget, firms are to be hit by the Bank as it forces rates higher than would have been needed if the Chancellor had taken action to slow down the consumer boom. A stable, sustainable climate for investment is not built by hitting firms with a triple whammy of a soaring pound, a hike in tax and higher interest rates.
The Government have made a serious miscalculation with that policy mix. Whether it was done for political purposes or not, loading the measures to slow down the economy on to the business sector and our public services is incredibly ill-advised. Indeed, the mistakes in the macro-economic framework are the fatal flaw of the Budget. The Liberal Democrats welcome the tightening of fiscal policy and the debt reduction strategy, but the targets are ill-chosen because the public sector and businesses are not the ones fuelling the boom.
The price of the Budget will be higher inflation and a higher cost in job losses when that higher inflation is corrected. The Chancellor aimed his Budget and the Finance Bill at bringing stability to the British economy. With regret, we believe that he has not achieved that.

Miss Geraldine Smith: I am grateful for the opportunity to make my maiden speech and, as the newly elected Member of Parliament for Morecambe and Lunesdale, it is wholly appropriate that I do so in this important debate. My constituency is made up of the seaside resorts of Morecambe and Heysham, the Skerton area of Lancaster, the old railway town of Carnforth and rural communities stretching to the Yorkshire and Cumbrian borders.
Because of its geographical location, the constituency is widely known as the gateway to the Lakes, which is a fitting description as most of the Lakeland tourist locations are within easy reach. The area is one of outstanding natural beauty and superb scenic views, with abundant wildlife.
Morecambe bay is one of the most important sites in Europe for migrating birds and harbours more curlew, oyster catcher, turnstone and migrant waders than any other site in Britain. It holds more than a quarter of the entire British breeding population of the bittern, one of our rarest and most threatened birds. On a clear day, the superb backdrop of the Lake district makes Morecambe bay one of the most picturesque areas in the world for bird watching. The sun setting over the bay is something special to behold and I urge all hon. Members to avail themselves of the opportunity of the summer recess to see it for themselves. Please come and see my constituency—it is wonderful. The close proximity of the historic city of Lancaster, whose virtues were extolled at great length by my hon. Friend the Member for Lancaster and Wyre (Mr. Dawson) in his maiden speech, enhances the area's potential to become one of Europe's leading tourist destinations.
I pay tribute to my predecessor, Sir Mark Lennox-Boyd, who took his seat in 1979 and served the constituency as its Member of Parliament for 18 years. Among his many achievements during his long service, he had the distinction of being appointed Parliamentary Private Secretary to the then Prime Minister, Margaret Thatcher. Throughout his parliamentary career, Sir Mark earned a reputation for honesty, integrity and decency. He accepted his defeat at the general election with the good grace and dignity of a true gentleman. I am sure that the House will join me in thanking him for his service and wishing him well for the future.
Earlier, I described my constituency as an area of great natural beauty, which it is. It is also my home. I am not only fortunate enough to live there, but I have the honour and privilege of serving the people of the area as their Member of Parliament.
There is a less attractive side to my constituency. Some parts of it host the highest rates of unemployment in Lancashire. In the west end and central Morecambe and in Skerton, large numbers of people live in appalling accommodation. In these areas, poverty, ill health, anti-social behaviour, drug and alcohol abuse and crime abound. After 18 years of Conservative Government, splendour and squalor sit side by side in my constituency.
Like so many other seaside resorts, Morecambe's problems began with the decline in the holiday trade. In Morecambe, this was more intense and persistent than elsewhere. Over the years, many of the resort's attractions were progressively run down and closed. At the same time, 70 per cent. of its hotel and guest house

accommodation fell out of holiday use. This massive stock of redundant hotels and boarding houses—which became suitable only for letting as cheap houses of multiple occupation, offering grossly inadequate standards of accommodation—acted as a magnet to the urban poor, the unemployed from towns and cities in close proximity such as Lancaster, Blackburn, Burnley and Preston.
The result is that once prosperous areas of Morecambe now have high concentrations of social and economic deprivation. They have a largely transient population, including the long-term unemployed, single-parent families, resettled mental health patients, old-age pensioners and single homeless persons. The strain that this has placed on welfare and social services, schools, doctors and police has reached breaking point. The cycle of decline that is blighting the lives of so many of my constituents must be broken, but it will be broken only when we find a lasting cure for long-term mass unemployment.
Despite enormous difficulties, my constituents—and, in particular, the business community—have shown a remarkable degree of resilience. They and I share a determination to regenerate the area and restore its prosperity. That regeneration process has already begun. By taking advantage of derelict land grants and single regeneration budget funding, public and private partnerships have been formed and new investment attracted into the area.
The signs of urban and economic renewal are there for all to see. but much more needs to be done. It is essential for the future prosperity of the area that the tourism industry is rebuilt. It is vital that all those interested in the industry work in harmony and co-operation and not in competition with one another. It is equally important that they seek to co-operate with other resorts around the country. I welcome the proposal from my hon. Friend the Member for Blackpool, South (Mr. Marsden) to set up a seaside resorts committee of Back-Bench Members. This would give hon. Members the opportunity to display the level of co-operation that will be needed if the British tourism industry is to be revitalised.
We must ensure that the urgent need for renewal of the infrastructure of our resorts is strongly pressed both here and in Europe. Although the problems of social and economic decay are as acute in many resorts as they are in towns and cities, they go largely unrecognised both here and in Europe. We live in a country rich in history and abounding with natural beauty. We must ensure that we have the infrastructure to match those priceless assets so that the tourism industry can compete with its counterparts in Europe and elsewhere.
Earlier in my speech, I referred to the importance that I place on the elimination of mass unemployment and in closing I wish to elaborate briefly on that. Mass unemployment, poverty pay and resultant welfare dependency are choking the life out of the economy. The current waste of billions of pounds of taxpayers' money to keep people in the poverty trap or on the dole is inhibiting our ability to develop the country's infrastructure, properly to fund the NHS and education and to restore the value of the old age pension. The ever-increasing cost of welfare dependency is hampering economic growth. That increase must be halted and reversed.
The Government must develop economic, industrial and education policies that support the creation of an inclusive stakeholder society. They must consult and


co-operate with industry and ensure that incentives are provided to encourage companies to adopt strategies that invest in people. promote training and maximise employment. They must encourage long-term investment and discourage short-term profiteering.
The Government must ensure that our education system is geared up to and supportive of industry's needs. They need to tackle low pay and the poverty trap which in themselves are barriers to economic growth. They must persuade our European partners to adopt policies which will produce growth and create jobs across Europe to realise the full potential of the single market. Above all, all parties in the House must recognise that mass unemployment is a cancer eating into the heart of our society and that its removal is essential for the health, wealth and security of the nation. The welfare-to-work programme in the Budget is a first step. I welcome the Budget and the Finance Bill.

Mr. Quentin Davies: We have heard three excellent maiden speeches today, and I would like to tell the hon. Members who made them how much I enjoyed listening to them. The hon. Member for Morecambe and Lunesdale (Miss Smith) waxed lyrical in a purple passage about Morecambe bay, and I felt that I had made a mistake in never having visited it. One learns a lot about different parts of the country from such speeches, which the House appreciates.
I was struck also by the fact that all three hon. Members said gallant things about their predecessors despite being members of different parties. One of the attractive aspects of this place—which is a civilised legislature, despite occasions when outside observers might be tempted to think otherwise—is that hon. Members can and do from time to time, when they feel that it is deserved, pay generous tributes both to the human qualities and to the service in this place of those with whom they disagree politically. All three hon. Members have shown themselves to be fully in that tradition of gallantry and courtesy in this House, and it is in that spirit that I am sure that all my right hon. and hon. Friends will welcome them here. We wish them the very best for their parliamentary careers—albeit we might not have the same hopes for the length of their careers as they may entertain for themselves.
I do not think that any of my remarks today about the Budget and the Finance Bill will have anything to do with my outside interests, but in case anybody supposes that they do, I refer hon. Members to my interests which are in the register.
There are moments in this House when one must use plain language, and this is one. This is an extraordinarily bad Budget, and an extraordinarily bad Finance Bill. It is a devastatingly bad Budget, and a devastatingly bad Finance Bill. It is so flawed that it is difficult to know where to begin an analysis of it. There are at least four fundamental fallacies on which its structure is based and these must be explored in the regrettably short time that Parliament will have to consider this important measure.
The first thing that strikes one about the Bill and the Budget from which it flows is that the Chancellor's prescription for the economy is in fundamental

contradiction to his diagnosis of the state of the economy. In my time in this place—or in the time in which I have taken an interest in public affairs—I can remember no Budget in which there was such a fundamental and obvious contradiction between the diagnosis and the prescription. According to the Chancellor's Red Book, the economy is in danger of overheating: the output gap is said to be close to zero, and that may well be the case. The service sector is said to be overheating more than manufacturing—and anecdotal evidence would suggest that that is right—and consumption is said to be increasing this year at an unsustainable rate of 4.5 per cent. If that is the rate of growth of consumer spending, and if it is likely to be even greater as a result of windfalls from the demutualisation of the building societies, it is indeed an unsustainable rate of increase.
I do not wish to argue with the diagnosis. If that diagnosis is correct, however, any sane and rational person would surely expect the cure to be to bear down on consumption in the Budget and, perhaps, to do something to increase savings, which would be the complement of such a strategy designed to meet potential overheating in the economy. Instead, however, we are presented with a Budget that will not do anything to consumption. The reduction in consumers' incomes resulting from the increase in excise duties and the reduction in the value of mortgage interest relief seem to be exactly compensated—more or less to the last decimal point—by the reduction in value added tax on domestic fuel and the proposed additional welfare spending. The Budget will have no negative effect on consumption.
At the same time, logically and following from the Chancellor's diagnosis, savings should be incentivised in some way. We have exactly the opposite—an unprecedented, new and burdensome levy is to be placed on contractual savings. I will give way to the Economic Secretary to the Treasury: perhaps she can defend herself.

The Economic Secretary to the Treasury (Mrs. Helen Liddell): I regret the fact that the hon. Gentleman left the points that he was making about consumption before telling us what he suggests should be done about it. Is he recommending an increase in the basic rate of tax, for example?

Mr. Davies: Certainly not—that would be the most damaging way to impact on consumption. I certainly would not reduce VAT on domestic fuel, which was such a perverse thing to do. And I would have got rid of mortgage interest relief altogether. I am happy to say this to the hon. Lady because I have already said it to my constituents. Had I been introducing a Budget, I would have taken measures that would have impacted directly on consumption. The hon. Lady is part of a Front-Bench Treasury team and a Government who have done the opposite and who have compounded that fundamental error by placing a new levy on savings. I do not know whether the hon. Lady wants to argue that point as well, but if she does I am afraid that again she will be unable to defend herself against that serious charge.
That failure to follow the logic of the Labour Government's own diagnosis of what the economy needs will mean one of two things: either there will be genuine overheating—inflation—or the whole burden of counter-cyclical policy and stabilisation will have to be borne by monetary policy, which means higher interest


rates and a higher exchange rate than we would otherwise require. What does that mean in practical terms? It means that the burden will be taken by the internationally traded sector of the economy, particularly by manufacturing. Consumers themselves will actually gain from higher real incomes if sterling is higher.
Whereas the rhetoric of the Labour party is that more needs to be done for manufacturing industry, the wealth-creating sector, and so forth, the Government have presented to the House a formula that goes in the opposite direction. It will profoundly damage manufacturing industry and job creation in that sector, but will do nothing about the growth in consumption about which the Chancellor himself expresses considerable anxiety. You cannot be much more irrational or perverse than that. Or, at least, you might think that you cannot be, Mr. Deputy Speaker, but if you think that, you cannot have looked at the rest of the Bill and the Red Book and compared the two. Frankly, that is what we need to do.
Investment is the other part of the equation that has not been dealt with. One might say, "The economy is overheating, so it would be sensible to bring down investment spending as well." The Government's rhetoric has been, "No, no, we want to increase investment. If the economy is suffering from capacity shortages, we need to invest." If you want to invest more, Mr. Deputy Speaker, and the economy is overheating, that would naturally lead you to reduce consumption further and to have a lower exchange rate, so that demand that was no longer generated at home—no one would invest if there were no demand—would come not from domestic but from overseas consumers. The export and internationally traded sector of the economy generally would then invest to meet that increased demand from abroad or increased market share domestically as a result of the depreciation of sterling.
Exactly the opposite prospect is being presented to the country and the economy. Instead, we have strong sterling. If, Mr. Deputy Speaker, you also want to increase investment—I suppose that the Economic Secretary will not want to argue with this—you need to increase the return from investment. Far from doing so, the Budget reduces it. The net impact of the Government's measures on corporate profitability is negative. If one takes the windfall tax and subtracts the corporation tax reductions, one has a net increase in the tax levy on the corporate sector of about £1 billion—simple arithmetic. However, that does not take into account the increased pension contributions that a number of corporations will have to make to maintain the actuarial solvency of their pension schemes now that the return on investment in those schemes has been so reduced by the Government's abolition of the dividend tax credit.
One of the extraordinary and major lacunae in the Red Book—it is shameful of the Government not to have dealt with it in the Red Book—is the lack of an estimate for this incremental burden on industry and the corporate sector generally that arises directly from the Budget. Whatever it is—obviously, it is several hundred million and it may be billions—it has to be added to that net tax levy on the corporate sector of £1 billion-plus. That will reduce corporate profitability. All other things being equal, that will reduce the incentive to invest.
We hear much from the Government about the fact that capital allowances are being increased. That, supposedly, will persuade people to invest. What an extraordinarily

naive assumption. We all know—we have learnt it over and over again—that indirect incentives for investment are ineffective at increasing the aggregate investment rate. Mathematically and logically, they may be certain to have some impact because they reduce the cost of investment, but it will be small. The deadweight cost of such subsidies delivered through the tax system or otherwise is extremely high. It is an ineffective way to assist industry to increase the level of investment.
And what we have certainly learnt is that time-limited tax incentives to invest have no effect on aggregate investment at all. They merely change the timing of capital investment. Now, firms, which can benefit from the increased capital allowances—50 per cent. for plant and equipment investment, which is only part of business investment, over a 12-month period—will bunch all the investment that they intended to make into that period to get the full benefit of the 50 per cent. allowance, but then there will be a falling away. There will be less investment when the tax break has come to an end. That has always been, and always will be, the case with time-limited investment incentives.
You will not have increased by one iota the total investment undertaken over time by British industry. If you have any effect at all, you will have done a most extraordinary thing and brought forward the investment expenditure into a time when, according to the Government's own analysis, we are suffering from overheating and need less spending.

Mr. Deputy Speaker (Mr. Michael J. Martin): Order. I know that the hon. Gentleman can get carried away, but he should refrain from using the term "you", because that is a reference to the Chair.

Mr. Davies: I would never wish to contradict you, Mr. Deputy Speaker, but I trust that if you would be kind enough to read my remarks in Hansard you will see that all my uses of the second person singular were indeed addressed to you. Sir; I know that you, Sir, have been examining the Budget and the Finance Bill with great attention and that you, Sir, as a reasonable man, will have taken an interest in the argument that I am advancing.

Mr. Deputy Speaker: The hon. Gentleman is in even deeper trouble than he was earlier, because he should not draw me into the argument. My examination of the Bill has absolutely nothing to do with the debate. I am here to chair the proceedings of the House. That is why he should not use the term "you".

Mr. Davies: I will then use the term "one" as a substitute for the second person plural—as in "one would imagine" or "one would conclude"—if I may, Mr. Deputy Speaker.
The third area of enormous weakness in the Budget, its third fatal fallacy, relates to savings. The effective new levy on savings created by the abolition of dividend tax relief will have several impacts. The first impact, on the individuals concerned, will be serious, because everybody who has invested in a personal pension or any other defined contribution pension, or a life insurance or endowment policy, will have to calculate how much less well off they will be than they had expected to be when they took out the policy or began to contribute to the pension. That will cause great agony of mind, and in some cases great family misery.
I feel especially for those who have mortgages and have invested in endowment policies with the intention of paying off the capital value at some time in the future. With the existence of dividend tax credits, they would have had every expectation of achieving a capital sum to meet the need to repay the mortgage, but they will now find that there is a substantial shortfall. There is no doubt that millions of people will be affected by the measures. Certainly, all the self-employed, who by definition can only have personal pensions, will face a considerable reduction in their standard of living in retirement. That is the human impact.
The second impact will be the fact that if the incentive to save is reduced, saving will be reduced. I presume that the Financial Secretary believes that supply curves are upward sloping and demand curves downward. Perhaps the Treasury now lives in a world in which it is the other way round. That would explain a great deal. All of us who believe in the laws of gravity believe that supply curves are upward sloping and that if the return from saving is reduced, fewer people will save, or people will save less. We need more savings in the economy, both because the savings ratio in this country has always been low by the standards of our industrial competitors and because at present we appear to have a problem of overheating. In fact, however, we shall get less.
The third impact of the savings levy imposed by the Government is on the distribution—the allocation—of the remaining and reduced savings flow. There will be some extremely perverse consequences. The dividend tax credit was available to institutions—collective investment vehicles such as pension funds and life insurance companies, the so-called gross funds—that invested in British equities. Those funds will find that in so far as they invest in instruments other than British equities, their prospective returns will not have been reduced by the levy, and as all portfolio investment decisions are based on relativity—they are decided at the margin in relation to the relative attractions of alternative financial instruments—there will be an enhanced inducement to invest in other instruments, such as debt instruments or real estate, as though that were not sufficiently overheated, or, indeed, in foreign equities.
The Government go in for a great deal of rhetoric about building up investment in British industry, but they have produced a Budget which will drive the reduced available savings flow into such investments as real estate and foreign equities. That is very good news for the German or Japanese stock markets, for emerging nations' stock markets, or for Wall street, because more British savings will go there than before.
I suppose that the Financial Secretary will get letters from brokers in Wall street. Frankfurt or Singapore, thanking her very much. Perhaps the letters will arrive with a few bunches of flowers; they will be thoroughly deserved, because the benefits received by those brokerage houses will have flowed as a direct and inevitable consequence of the Government's decisions as enshrined in this appalling Budget and Finance Bill.
In this very sad story, there is a fourth fatal illusion. Perhaps this one should surprise us less from the Labour party, because it is the old socialist illusion that somehow Governments create prosperity and jobs.
An important aspect of the Budget is the welfare-to-work programme. I am all in favour of welfare reform. I agree with my hon. Friend the Member for East Yorkshire (Mr. Townend), on this subject at least: we were both disappointed in our efforts to try to persuade our right hon. Friend the Member for Huntingdon (Mr. Major) to introduce an element of workfare in this country. I am pleased that the Labour Government are beginning to make progress in that direction, and I totally support the concept of compulsion in welfare reform and of saying to the unemployed that they have an obligation arising from the money that they receive from the taxpayer and should take a suitable course of training or the available jobs, or get involved in a community work programme; an awful lot of jobs need to be done that could provide considerable satisfaction and benefit to the individuals who take part, as well as to those who benefit from the goods or services produced.
There is, however, a fatal flaw in the welfare-to-work programme: the idea of subsidising employers to take on specific, targeted employees who come off the welfare rolls. The measure will not increase the total demand for labour from firms that are offered the new employees with the subsidies. Indeed, because of the rise in the value of the pound and in interest rates, and the increase in the total burden of corporate taxation, the demand for labour in many parts of industry, and in industry as a whole, will fall.
There will be a major distortion, with economically damaging consequences, involving a great deal of human unfairness. Employers will have an incentive to take on employees who carry the subsidy and not to take on those who do not carry it. Indeed, there may be an incentive to discharge those who do not carry the subsidy so that employers can gain it. If employees taken on with the subsidy have it taken away after a time, the incentive will again be to take on new employees who carry it. There will be great human unfairness. The economic impact will probably be perverse because it is likely that employees who carry the subsidy will have lower productivity levels. They may be less motivated. If they have been unemployed for a long time, they may be out of the habit of work. Aggregate productivity would be reduced.
More importantly, the scheme is financed by a levy on industry—the so-called windfall tax on utilities. That sector is a highly profitable part of British industry. If some £5 billion is taken from it, investment and employment generation in it will be reduced. That would undermine viable, profitable, sustainable jobs in good profitable companies. Having no doubt taken some administrative costs out of the money collected, the subsidy will be handed over to create artificial jobs in other firms in other sectors of industry. That is the old socialism, red in tooth and claw, that we have known about for 50 years or more. It consists of penalising the successful and subsidising the unsuccessful. The result, of course, is an economy that becomes increasingly unsuccessful and unproductive.
This is a terrible Budget which all of us who care about the future of our country must regret. We shall all rue it, not only those directly affected such as holders of personal pensions. It is small consolation that among those who will rue it most will be those who were unfortunately misled by the blandishments of the Labour party's propaganda at the recent general election, who will learn all too soon how profoundly wrong they were.

Mr. Jim Cunningham: I congratulate the hon. Members who made their maiden speeches tonight. I have no doubt that we shall hear much from them in coming years.
I was astounded to hear the cries, pleas and wails of the Opposition, particularly in relation to some of the things that they accused us of. Among their throw-away lines was the suggestion that Labour Governments are soft on inflation. That makes me think back to the hyper-inflation of the Heath Government. We certainly remember the hyper-inflation of the Thatcher Government and Geoffrey Howe's raid on the bankers. When the Tories fuss about the windfall tax, we can always take them back to his day, when the precedent was set.
The Tories complained about a £300 million cut in local government. They said that they got that figure from the Local Government Association. They do not talk about the hundreds of millions of pounds that the previous Government cut over the past 10 or 12 years. The Tories are quick to talk about something that is currently speculative. I find it amazing how they can turn things on their heads and blame everyone but themselves. They have not come to terms with the fact that the rhetoric that they have used for the past 18 years has not worked with the electorate or the economy. They have not grasped that yet.
I listened intently to the hon. Member for Grantham and Stamford (Mr. Davies). I kept wondering why the Tories had not made him Chancellor of the Exchequer, which might have saved them a few seats at the general election. We come back to the fact that it is all rhetoric, innuendo and smokescreen. I have listened closely to the debate and the Tories have never come to the real issues of the Budget. As a first step, the Budget seeks to tackle the long-term weakness of the British economy. From successive Governments, particularly Tory Governments, we have had short-termism. Many hon. Members will have come across that issue while fighting the general election.
I was amazed that the Tories raised the issue of mortgage interest relief at source, which is the help that families get to pay their mortgages. It was the Tories who started to cut it. We can go further. They talk about benefits and helping communities, but it was their Government who stopped people who were made redundant getting 12 months' average earnings.
The Budget is about encouraging investment and dealing with poverty, especially among the young unemployed. Tory Members complain about the so-called subsidy to industry to provide quality training, but what about the terrible cost of those young people who were left on the dole under the previous Administration? What about the havoc wreaked in the inner cities, particularly in places such as Coventry, which I represent? What about the level of crime caused by the fact that young people felt disfranchised and could not get jobs? The scheme for young people the Government propose is an investment well worth making. As the economy grows, there will be a need—certainly in the building sector—for apprentices and skilled young people. The Budget is a step in the right direction.
Another objective of the Budget is fairness. Consider how previous Tory Governments treated old-age pensioners. They broke the link between pensions and

earnings. They introduced and increased VAT on fuel. We had to stop them, and make them reduce it. The Budget addresses environmental issues that concern people worldwide. Those issues must be tackled. For the first time, we have a Government who are prepared to address them. I do not want go on much longer. Many of my hon. Friends have covered the points that I should have liked to make. I support the Budget and I am sure that many of my hon. Friends will speak further in support of it.

Mr. Owen Paterson: I congratulate the three Labour Members on their excellent maiden speeches. The hon. Member for Bexleyheath and Crayford (Mr. Beard) was most generous about his Conservative predecessors and talked interestingly about his constituency.
I was equally impressed by the maiden speech of the hon. Member for Upminster (Mr. Darvill), who replaced Sir Nicholas Bonsor. Sir Nicholas represented my parents for a time in Cheshire. The hon. Gentleman's kind comments matched the character of Sir Nicholas, who was a good man and a good Member of Parliament. The hon. Gentleman spoke fluently and coolly about his constituency, and I was impressed by his comments on the Bill.
The hon. Member for Morecambe and Lunesdale (Miss Smith) gave such a delightful character to her constituency that I am almost tempted to change my holiday plans. She spoke nicely and kindly about Sir Mark Lennox-Boyd, whom I met only once, outside Aintree race course after we had been expelled because of the IRA bomb. She spoke with feeling and interestingly about the problems of her constituency. I wish all three hon. Members well in this Parliament. I am sure that they will make interesting contributions, but that they will not be surprised if I disagree with them.
It is with real humility that I stand to make my maiden speech after such line performances. I am deeply grateful to those who voted for me and sent me here. I am very conscious that Shropshire has been sending Members of Parliament to London since June 1264, when four knights whose names have been lost went to London. They were deemed "unfit" by Peter de Montfort, most probably because they sided with the King, not the barons' party. Ever since, there has been a tradition in North Shropshire and Oswestry of sending robust, independent-minded Members to Parliament, none more so than my predecessor John Biffen, who was a most splendid parliamentarian. He is enormously popular throughout the constituency. It is an honour to have known him since 1987, when I helped in the election with him.
John Biffen helped to reforge Conservative thinking in the late 1970s. He played a crucial role as Chief Secretary to the Treasury in the early Thatcher Government, helping to forge the first Budgets. As Secretary of State for Trade and later as Leader of the House, he earned extraordinary respect on both sides of the House and from the gentlemen of the press—the fourth estate. He is truly a hard act to follow.
I am sorry to report that John Biffen recently became seriously ill shortly after he was elevated to the peerage as Lord Biffen of Tanat. I am sure that you, Mr. Deputy Speaker, and everyone in the House will wish him a speedy recovery. There is one physical link between us.


He left me his fridge. Despite the best efforts of the Serjeant at Arms and his excellent team, the fridge has not been found. I am sure that if you could help in the search, Mr. Deputy Speaker, you might help me find the secret which enabled John to speak with such prescient wisdom without being pompous and always with a wonderful wry sense of humour without being flippant.
As far as I know, my family have produced no previous Members of Parliament, but my wife's family have produced eight successive generations. Some of them, one has to say, are questionable. One in the 1770s was caught in the act of adultery with his doctor's wife and refused to resign. Another was reputed to be quite the worst Home Secretary in the 19th century and a third sadly died after eating a kipper in too much of a hurry on the way to an election meeting.
Every now and then a family throws up a real star, and Nicholas Ridley was a most brilliant man. He had wide interests outside the House. He was a most talented water colour artist, a stonemason, an architect and a fine fly fisherman and shot. Yet he also had political beliefs of the deepest conviction to which he stuck through thick and thin and which, I am glad to say, he put into effect in a most effective manner in the late 1980s as a Cabinet Minister. Nicholas Ridley was a profoundly politically incorrect person. He ate, drank and smoked things of which many people would disapprove until the day he died.
I was born in Whitchurch in my constituency, and I consider it an enormous privilege to represent the place where I have lived most of my life. I see a large number of historical figures as an example to me. I come here to represent North Shropshire and also to defend the United Kingdom. I see that a major role is to defend the powers invested in the House. One historical figure was Caractacus, who boldly stood up to the harmonising and centralising power of Rome. Another was King Offa who, confronted with his West Lothian problem, built an enormous dyke—as a warning to Welsh Members—to the lasting detriment of the Welsh economy.
I feel that it is our role as politicians to guard the precarious balance of power between conflicting interests and to ensure the peace. The last time that the peace broke down irrevocably was in the civil war, when north Shropshire was badly divided. Oswestry was burnt to the ground by Cromwell. This morning, I went to probably the largest public meeting since the civil war. Well over 100,000 people came together to defend country sports, which generate £3.8 million.
The Labour party won a great victory on 1 May. It has an overwhelming parliamentary majority, but it should be humble and remember that it received a minority of the public vote. The Labour Government have the power to do almost anything that they want, but they should not use that power to impose their ideals on large minorities in distant parts of the country. I quote the words of Catherine the Great, who was invested with total power. She was an autocrat by divine right. She wrote to Voltaire, saying, "You are so lucky, dear Voltaire. You write your ideas on paper whereas I, poor Empress, write upon human skin, which is much more ticklish."
I am glad to say that, following 18 years of Conservative Government, North Shropshire today is an extremely prosperous place. Unemployment is down to 4 per cent.

I consider myself to be in a position to judge the prosperity of the area. I have spent all my life in manufacturing industry, as a tanner. I have travelled the world buying materials and selling leather, overwhelmingly for export, With one or two exceptions. I have not visited a single business or farm in North Shropshire in the past two years which has not invested and taken on new labour, new people, to work in their businesses. That is a tribute to what we have achieved.
North Shropshire is still overwhelmingly rural and agricultural. It has the largest milk lake in western Europe. The industries are mainly family owned and relatively small, and related to agriculture. There are odd shining exceptions such as the enormous investment by British Telecom near Oswestry and the orthopaedic hospital in Gobowen, which is world renowned for its work. We have fine private and state-financed schools in North Shropshire. I have to say that the formula that distributes central Government funds to local government militates sharply against sparsely populated, rural counties such as Shropshire.
The Budget is not necessary. North Shropshire is prospering and investment is coming in. The central theme is investment. I went to Aretsried in Bavaria last year to meet Mr. Theo Müller, who has invested £50 million since 1991 in a state-of-the-art yogurt plant in Market Drayton. I understand that it is the convention not to speak in foreign languages in the House, but what I am about to say is easy to understand. He greeted me with the words, "England ist paradies". Those words uncannily echoed the promise by Jacques Delors that if Britain stayed out of the social chapter it would become a paradise for foreign investment.
For three hours, Herr Müller regaled me with the joys of doing business in an England with a deregulated and reformed economy—such a contrast to the sclerotic regulation that trips him up in all his moves in continental Europe. He said again and again that one of the great attractions of doing business here was, first, that his management and work force in North Shropshire had grabbed the opportunities that he had presented to them and. secondly, that corporate and personal taxation was lower here than in most countries in continental Europe. Yet the Budget, which has been rushed out 10 weeks after the election, introduces 17 tax increases.
When Nicholas Ridley made his maiden speech in 1950, he quoted one or his predecessors, Lord Dunrossil, who spoke on the 1932 Budget. His statement was clear and as true then as it is now. "All taxation is bad." There is no tax that could be worse than the windfall tax. It is capricious, arbitrary and retrospective.
I do not think that the money yielded will be spent effectively. I have been around the world and I know that such welfare-to-work schemes are extremely expensive and they do not achieve their aim. In the 1980s, the Australians launched such a scheme, but when the Australian Bureau of Labour conducted an in-depth survey of it at the end of the 1980s it found that the results were so calamitously bad that it abandoned the project. I do not believe that the people of North Shropshire will take on school leavers next year; they will simply wait six months and then take them on, and the £60 bribe. That policy will distort the labour market unnecessarily.
The windfall tax is a tax on pensioners whose funds are overwhelmingly invested in the equities of the privatised utilities. Those pensioners also spend a higher proportion


of their income on the utilities' products. Current and future pensions will also be hammered by the Budget as a result of the changes to ACT and the dividend regulations.
When one considers that one of the previous Government's great successes was to build up private pension funds to the value of £650 billion, which is greater than the total sum of such funds held throughout Europe, and when continental Europe is beginning to realise that it has no chance of funding its pension commitment out of current taxation, it is utterly bizarre that we should turn the other way. The Bill will effectively take out £50 billion that would otherwise have gone into investment—that is what it will take to maintain current pension funds. It is simply not good enough for the Chancellor to say that many pension funds are overfunded; many are operated according to different contribution schemes. Between 5 million and 6 million people may pay £20 a month extra because of the Government's changes. That is a straight tax.
I do not believe that ACT will achieve the aim of trying to direct dividends into investment. A study conducted by the City university as recently as May has shown that, quite contrary to current Labour thinking, those companies that pay generous dividends also invest heavily in research and development.
A further particularly pernicious measure in the Bill is the change on tax relief on private health. I am sure that you have heard, Mr. Deputy Speaker, that many constituencies are beautiful; mine is as beautiful as any other and many people choose to retire there. There is always pressure on the health service and I find it extraordinary that the Government should now introduce a measure which could, according to one newspaper report at the weekend, put another 100,000 people on waiting lists. The average person over 60 on a private scheme takes £760 of care a year. The Government's measure does not make sense.
Another particularly pernicious measure which will damage North Shropshire is the increase in fuel duty. North Shropshire has five market towns and 98 villages. In such an area, the car is not some nasty polluting machine which should be locked up in a shed and the key thrown away; it is an essential tool of everyday life. To raise fuel duty by 6 per cent. above inflation is nothing less than vicious.
I see trouble ahead: the exchange rate is rising to levels where 500,000 export-related jobs must be put in jeopardy soon. Their loss will wipe out any advantage from the schemes paid for by the windfall tax. The Government have given all the tools away by handing over powers to the Bank of England. It is bound always to act conservatively and to take a tough line on interest rates. That is exactly what my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) forecast. He held it hack, but it has now announced three interest rate rises. That will hurt businesses in North Shropshire.
I am highly alarmed by the relaxation of the inflation target. That is extraordinary because it will hurt those sectors that are dear to many on the Labour Benches, who are keen to see enormous increased spending on health and education. We, on the Conservative Benches, also want good quality services in those sectors, but we are aware that they must be paid for. There are precious few people like me who have been in wealth-creating industries and who can see the matter from the other side.
The Labour party was defeated heavily four times. It saw the command economies of eastern Europe fail and it grudgingly had to admit that state socialism has not worked. It has not, however, taken on market economics with any enthusiasm. It is not enough for the Government to employ the chairmen of enormous corporations and suddenly to say that they are the party of business. To be the party of business and to talk genuinely about the long term, the requirement is very simple, one needs low inflation, low tax and minimum Government interference. The Government still have an overriding belief that the state can direct the economy and steer money from dividends into investment. They do not understand the simple truths that have created the enormous successes such as Hong Kong, where the state only takes 16 per cent. of the gross domestic product.
The Labour Government do not understand that the reward for risk is profit, and that that profit should stay with the person who took the risk, even 10 years after he took it. The person who invests takes a risk. All the businesses that I have in North Shropshire are investing and they deserve to keep their rewards. They should employ people because those new employees will add value and will help their companies to grow. They should not take on employees purely because of a temporary bribe.
The Budget sends out dreadful signals to the outside world. The Government are acting like a man-eating tiger. They have screwed themselves up to bite the corporate sector once—90 per cent. of the new taxation falls on that sector—and once the proceeds of the windfall tax have run out, they will surely be tempted to bite it again.
We had a bad Budget last week and this week we are met with a bad Bill. It will not help my constituents and I urge the House to vote against it.

Mr. Jim Murphy: I should like to speak in support of the Bill and the measures in it, but before I do so I should like to pay credit to the hon. Member for North Shropshire (Mr. Paterson), who made a maiden speech of much interest and detail, although many of his arguments were flawed. I should like to pick up on two issues that he raised; first, the serious matter of his missing fridge and, secondly, his wife's family.
I am jealous of the hon. Gentleman because, as a new Member, I do not have an office big enough for a fridge, so perhaps he would like to organise an office swap or at least a shared fridge.
As for the hon. Gentleman's wife's family, he will be aware that the Labour Government are committed to abolishing the hereditary right of peers to vote. Perhaps someone should introduce a private Member's Bill to end the hereditary right of the hon. Gentleman's wife's family to be elected as Members of the House, particularly given the hon. Gentleman's description of some of them. I am sure that he will not follow the acrimonious and contentious path taken by some of them.
I should like to refer to clauses 1 to 5 and respond to the debate that has taken place tonight and during the Budget debate. I should also like to reply in particular to some of the points raised by the hon. Member for Grantham and Stamford (Mr. Davies), although I note that he has now left the Chamber.
The hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood), who spoke on behalf of the Liberal Democrats in yesterday's debate, described our


welfare-to-work project and the windfall levy as rough justice. Labour Members contend that they are nothing of the sort—indeed, quite the opposite. Perhaps the sanctimony that comes from decades in opposition—and the continuing prospect of further decades in opposition—has clouded the hon. Gentleman's judgment. Our plans, contained in the Finance Bill, are fair to the consumer, fair to the unemployed and lair to the economy.
The utilities have built up excess profits that could be put to much better use. The original price caps on the utilities were far too generous and the price controls on them were far too limited, so they were able to build up enormous cash surpluses. In its survey, the National Consumer Council identified that in the two years between 1990–91 and 1992–93 the electricity companies were able to benefit from increased profits of 48 per cent. That figure highlights the need for us to levy a one-off windfall tax.
It was the previous Government's inability to act that made it unfair for consumers. I welcome the review on regulation to be carried out by my right hon. Friend the President of the Board of Trade. I also welcome the promise made by my right hon. Friend the Chancellor that the cost of the windfall levy will not be borne by the consumer.
This Government, unlike the previous Government, have priorities based on detailed experience of the unemployed rather than outdated dogma. We are determined to end the scourge of youth unemployment and long-term unemployment and to invest in the long-term future—in the raw materials and individuals of this country. The Government's statistical unit identifies that 85 per cent. of people who are unemployed for less than one month find work, but it also shows that fewer than a quarter of people who are unemployed for more than a year go directly into work. Those figures—every one of which is an individual human tragedy—show why the Government are properly motivated and are addressing the problem of long-term unemployment. They show that the longer someone is out of work, the harder it is for them to get back into the marketplace. That is the rationale and justification for our windfall levy. The hon. Member for Roxburgh and Berwickshire spoke about rough justice, but it is nothing of the sort. The windfall levy is about economic justice and social justice, which is why we are so eager to implement it only 10 weeks after coming into office.
I have spoken about the Liberal Democrats, but I also want to mention the Conservatives, whose response has been strange. Conservative Members want to protect the excess profits of the privatised utilities and prevent an opportunity to help the young and the long-term unemployed. The Tories' response to our welfare-to-work programme and the windfall levy has seemed hysterical and makes the privatised utilities' response look measured by comparison. The share prices of the companies have risen since the announcement. The threat of a legal challenge against the Government from some of the companies has receded—no doubt despite encouragement from Conservative Members, who are perhaps disappointed.
Hon. Members will be aware that in Scotland, Ian Robinson of Scottish Power has taken on the responsibility of leading the task force of welfare to work.

That is a strong symbol of the way in which we can we work together to deliver job opportunities for young people. The Tories seem to be more opposed to the windfall levy than the privatised utilities are.
In my few short weeks in the House I have come to understand something about the nature of opposition. It is my understanding that the Opposition should give credit where it is due. That is a lesson that the Labour party learnt towards the end of its period in opposition. It was certainly a characteristic of the rehabilitation of the new Labour party. I have no doubt that the Conservatives' inability to learn that lesson will end in the ruination of a tired Tory party.
The Tories complain about opportunity and then take every opportunity to complain about our windfall levy and job opportunities that it will provide for young people. As hon. Members are aware, the country will not thank the Tories for their 18 years of intransigence on the subject of job opportunities for the young and their 10 weeks of outright hostility to our new deal for young people and the long-term unemployed.
This is my second speech in the House. As well as knocking the Liberal Democrats and the Conservatives for what they have to do in opposition and in government over the past 18 years, I should also like, as a Back Bencher, to ask Ministers for some clarification of their plans. I seek some important clarification on the one-off windfall levy. Of course it was a one-off levy: it is unique. Unlike the Conservatives, who introduced 29 different schemes for job opportunities, job creation and welfare, we are introducing our new deal for the length of the Parliament.
We inherit a problem because there is a lack of faith among many unemployed people, particularly the young unemployed, who have experienced months—sometimes years—of failed schemes under the previous Government. They need to make a leap of faith. What measures do we, as a Government, have planned to encourage that leap of faith? Do we have any plans for a clear statement about the rights and responsibilities of the individuals and of the employers, who are so crucial to our ability to deliver this project?
I also seek clarification about the quality standard marks that we will use in government to measure the Bill's progress. I should like clarification, perhaps not this evening but as we move towards the implementation of the new deal, of how we intend to track the many thousands of people who will undoubtedly benefit as a result of our adventurous and imaginative plans.
When I was investigating the levels of youth unemployment in my constituency of Eastwood, I found that the level of long-term youth unemployment was just below 40 per cent. That figure concerns me and my constituency. After all, Eastwood had been the safest Conservative seat in Scotland, yet it suffered from 40 per cent. long-term youth unemployment. The tables delivered to me by the House of Commons Library reveal the true level of youth unemployment in some constituencies in Northern Ireland. Ten Northern Ireland constituencies have long-term youth unemployment of more than 50 per cent. and in two constituencies the level is more than 60 per cent. For West Tyrone, the figure is 62 per cent. and for Mid-Ulster it is 60 per cent.
I know that Northern Ireland Ministers are not present this evening, but I think that the Under-Secretary of State for Northern Ireland, my hon. Friend the Member for


Clydebank and Milngavie (Mr. Worthington) is working on some specific measures and I look forward to receiving details. I should like to know what specific plans we have to overcome the abominable levels of long-term youth unemployment that exist in Northern Ireland.
We are all aware of the phrase, "The devil finds work for idle hands". To call the paramilitaries the devil would be to pay them too much of a compliment, but if we do not help many of the young people of Northern Ireland to change their life style and find opportunities, I fear for some of their futures. I should welcome some information about how we plan to address the problems in Northern Ireland.
I welcome the news from the Government that they intend to reform the 16-hour rule, thus enabling the unemployed to study part time. I welcome the plans for those reforms because I benefited from that scheme. I studied part time while being unemployed and that took me on to university and, ultimately, to my place in the House. Some hon. Members might say that that is a reason to clamp down on the 16-hour rule, but it was definitely one of my first steps towards becoming a Member of Parliament.
Only 14 per cent. of those who are currently unemployed are studying, and more than 25 per cent. of those who are currently working are involved in study. I should like to consider ways in which we can improve educational and training opportunities for those people. That is why I welcome the windfall tax and the welfare-to-work programme. We have identified four quality pathways out of difficulty and depression and a place on a scheme for education and training at college is just one of those opportunities.
My experience of studying occurred just over 10 years ago. I shared the lecture theatre with mature men and women who were unemployed and some who had families. The transformation it brought about in their lives was remarkable. Although I have lost contact with many of those people, I have not lost touch with that experience and, as I have said, I welcome the Government's plans to reform the 16-hour rule.
As I understand it, one of the current regulations states that individuals must be available for work at 24 hours' notice. It does not make economic or social sense for someone who is only three weeks away from completing a course to have to remove himself at 24 hours' notice. That may mean that that person cannot sit an examination—and they may have no other opportunity to achieve that qualification. It is bad for personal development and is socially unjust.
The Finance Bill contains an enormous number of measures that make long-term economic sense. They are socially just and will increase opportunities for many thousands of individuals throughout the country. I wish the Government well in putting together those plans and I look forward to working with Ministers to bring about real changes in the real lives of people in my constituency.

Mr. Simon Burns: I add my congratulations to those who have gone through the daunting experience of making their maiden speeches this evening. I pay tribute to my hon. Friend the Member for North Shropshire (Mr. Paterson) whose confident, witty

and eloquent speech showed that the people of North Shropshire were right to return him to the House on 1 May.
It is just over a week since the Chancellor of the Exchequer delivered his Budget statement. Eight days later, there is a great difference in the Chamber as we begin the long and detailed task of studying and implementing the Finance Bill. There is a great contrast to the euphoric scenes we witnessed among Labour Members when the Chancellor sat down, having delivered the first Labour Budget for 18 years. I thought that they were trying to compete with each other in their enthusiasm and demonstrations of support in the hope that the Whips would take notice of them and that they would earn maximum brownie points on what I understand is known in certain quarters as the Helen Brillion scale of sycophancy.
Today, we have had a more measured and mature debate because a week has passed in which the experts in the financial markets and the media and hon. Members have been able to read the small print of the Budget. The small print, as outlined in the Bill, is not as good to read as was suggested by the Chancellor's delivery last week.
In some quarters the Budget has been called, erroneously, the people's Budget. I understand that some of the measures will be welcomed by certain sections of the community. I should like to look at what is in the Bill for pensioners to see whether it justifies the expectations raised by the Labour party prior to the general election. Yes, it is true that many pensioners will welcome the Chancellor's decision to reduce VAT on fuel from 8 to 5 per cent.—3p in the pound; 30p on a £10 fuel bill, £3 on a £100 fuel bill and £15 on a £500 fuel bill over the year. No one can say that pensioners will not welcome that, even if it is a relatively small amount of tax hand-back to that group.
However, the Chancellor has raised significantly the taxes on cigarettes and alcoholic drinks—that will come into effect in December and the new year. I will not argue about whether that is right or wrong, particularly because of the ramifications for health, but it is a fact of life that many pensioners smoke and even more probably enjoy a pint of beer or a drink from time to time. They will have to pay more from their pensions for that.
There is also the measure concerning pensioners who have tax relief on their private health insurance. I can understand that, as ideological warriors, Labour Members will be delighted that that measure will penalise about 600,000 pensioners, but have the Government thought through the implications for those who will no longer be able to afford the premiums and will now have to use the national health service? Their using private provision relieves some of the pressures on the health service.
I should like to deal specifically with ACT because I wonder whether the Government have thought about all the implications of that measure. There is one particular matter that I am disappointed the Chancellor did not include in his Budget. The National Assistance (Assessment of Resources) Amendment Order 1996 was published in response to the 1995 Budget of my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke).
To universal approval on both sides of the House, my right hon. and learned Friend raised the thresholds for means-tested benefits for long-term care from, at the


lower end, £3,000 disregard to £10,000 and, at the upper limit, from £10,000 to £16,000. That proposal was enacted in 1996 through the order, which has an impact because of the implications for occupational pensions. Under regulations 2(1) and 2(5), 50 per cent. of an individual's occupational pension can be disregarded in the calculations. Given what will happen to future pensioners with the new measures on ACT, there will be financial hardship for some pensioners whose wife or partner may be facing long-term care. I wonder whether the Government have given that any consideration.
The second point that worries me is an omission from the Budget. As a result of that 1996 order, local authorities were not allowed to charge anyone for long-term care if they had assets of up to £10,000. From £10,000 to £16,000 the calculations were worked out on a sliding scale, similar to the income support regulations. That is what the House wanted and what was proposed by the regulations following my right hon. and learned Friend's 1995 Budget.
I was a health Minister in the previous Administration and I found it extraordinary that one local authority thought that it knew better than the House and decided that it would not implement those regulations. Labour-dominated Sefton council said that it would make any pensioner who needed long-term care pay for it until their savings fell to £1,500—not £10,000. Help the Aged took the council to judicial review. I remember meeting councillors on another matter, at the beginning of this year, when the issue was raised. It was clear that the council had some sharp lawyer who had looked through the financial regulations emanating from the Budget to find a way to get the council out of its obligations.
To my amazement, in late March the judicial review found in Sefton's favour. That has created an extraordinary situation: every local authority with responsibility for the long-term care of the elderly could follow the Sefton route and disregard the will of this House and not finance such care until a person's savings have come down to £1,500. It is a chilling thought that tens of thousands of fragile and frail pensioners—the most vulnerable group in society—in residential care could be made to pay if they have assets above £1,500.
At the time of the court decision, the then Conservative Secretary of State for Health, my right hon. Friend the Member for Charnwood (Mr. Dorrell) said that if we won the general election we would block that loophole as quickly as possible. At the same time, the then Opposition health spokesman, the right hon. Member for Islington, South and Finsbury, (Mr. Smith), said that
a Labour Government would ensure that the cash thresholds remained in place. If that requires legislation, we will introduce it".
That was an unequivocal, clear-cut pledge, which I welcomed.
We had the general election. The Labour party won. It has now been in power for seven or eight weeks anti the new Chancellor has introduced his first Budget. During Prime Minister's Question Time a few weeks ago, I asked the right hon. Gentleman when the Government would introduce the promised legislation. To be fair, it is not the most talked about problem—although it is of paramount importance to pensioners and their families. It is clear that the right hon. Gentleman did not understand the question and was not familiar with the problem.
I understand that. We do not necessarily expect the Prime Minister of the day to know the answer to every question posed during Question Time, but he could have had the grace and the dignity—it did not reflect very well on him—to say that he understood the concern and would look into the matter. That would have been the end of the subject. Instead, almost in a panic—no doubt because he was terrified of the people in the Press Gallery, to whom lie pays particular attention because he is a vain man and likes his press cuttings to be good—he decided to ignore the question and just lash out. That is why I am pleased that a perspicacious journalist from The Independent noticed that it was the unanswered question of the day.
I then tabled a question to the Prime Minister—he seemed to have matured with time—who replied on 30 June:
I am concerned about the implications of the Court Judgment on the Judicial Review".—[Official Report, 30 June 1997; Vol. 297, c. 24.]
That is a more mature response.
The Chancellor could have included a small provision in the Budget to block the loophole without the additional expense and worry involved in an appeal of the judicial review decision. Instead, he said that if the appeal was unsuccessful, the hon. Member for Bradford, West (Mr. Singh) would introduce a private Member's Bill. That is one way to deal with the problem, but the first day allocated for dealing with such Bills is 28 November. The Bill will not get on to the statute book until mid-1998. That will mean that, for almost two years, pensioners in long-term care in Sefton will have been paying for parts of their residential care for which Parliament never intended or wanted them to pay. Meanwhile, other local authorities could adopt Sefton's policy.
The whole problem could have been rectified far more quickly and unequivocally through this Finance Bill. I do not understand why, given the categorical pledge by the Labour Opposition health spokesman, the opportunity to legislate has been missed in the Budget and the Finance Bill. I would welcome an explanation, in the wind-up, of why, rather than using the National Assistance Act 1948, the Government did not use the vehicle of the Finance Bill 1997. It would have required only a single clause, which I am sure no hon. Member would have opposed. to do what so many pensioners and their families want—and, indeed, believed that the Conservative Government if re-elected and the Labour party if elected would have done as a matter of urgency to stop other local authorities following Sefton's example—and rectify the gross injustice being suffered by a number of pensioners in Sefton.
I hope that the Economic Secretary will urgently examine the issue and will not rely on the legal processes and the possibility of a private Member's Bill to sort out what everyone, regardless of political persuasion, regards as a gross injustice and an arrogant misinterpretation of the wishes and intentions of this House following the 1995 Budget of my right hon. and learned Friend the Member for Rushcliffe.

Dr. Vincent Cable: My hon. Friend the Member for Kingston and Surbiton (Mr. Davey) has already spoken about the Liberal Democrats' basic critique of the Budget, which is essentially its impact on


public spending and key public services and the higher than expected inflation. I want to say something about the broader remit of the Government's economic policy, in particular today's events in the City.
We have made it clear that we fully support the Government's decision to make the Bank of England independent. We fully support the way in which the Chancellor chose to make it independent—with the Government retaining the political choice of inflation objectives. We share the Government's view that a great deal of the responsibility for the interest rate rises lies with the previous Government.
However, the Government have aggravated the problem by failing to take the political opportunity presented by the Budget to confront the British people with the direct option of a modest amount of increased personal direct taxation in order to take some of the consumer demand out of the economy.
There remains a real technical problem—I do not raise it in any party political sense—in that an enormous amount of the liquidity now swilling around the economy has been generated by building society demutualisation. That is being treated as a problem about which we can do very little, yet it has enormous implications. It is the equivalent of a 10p cut in income tax in its effect on consumption—and there is still a large amount to come into the system. There is growing concern about that, not only on the ground of economic policy, but because of wider implications such as the destruction of the building society movement. Indeed, many hon. Members have signed early-day motions about that.
Do the Government, in the context of the Budget or more broadly, have any thoughts on how to deal with the problem? There is an impact on the management of the economy. Building societies, or what is left of them, argue that perhaps now is an appropriate time to place a moratorium on demutualisation and to stop the process until we have had time to take stock of the implications. Perhaps that is something which Ministers should consider.
One of the major reasons why Liberal Democrats are opposed to a guillotine and to cutting discussion on the Bill is that many of the corporate tax provisions are extremely complex and have wide-ranging implications, which clearly have not been thought through. Ministers approached corporate taxation in a cash-grabbing spirit and did not think of some of the ramifications. There are historical precedents for that. Some of us remember the days when Kaldor and Balogh advised the first Wilson Government on corporation tax, capital gains tax and selective employment tax. The ripples from that emanated for years, and many distortions were created.
Today's newspapers give examples of some of the difficulties that will arise. One problem, which the hon. Member for Grantham and Stamford (Mr. Davies) mentioned, is foreign dividend income, especially the foreign investment dividend scheme. I do not claim to be a tax lawyer or to understand the full implications, but what appears to have happened is that the Government, in lifting tax credit on advance corporation tax, removed a major distortion and anomaly from the previous system by which investment was favoured in British companies over foreign companies.
The Government said very little about that effect, possibly because they suspected that their Back Benchers were not as committed to globalisation of investment as

they were. Perhaps Ministers did not understand the implications or thought that the FID scheme would offset that effect. We now realise, however, that many British companies might have to take action after the closure of the FID window and locate themselves overseas, because of the weight in their portfolio of foreign investment income. The Government might have to withdraw the scheme. I have no passionate views on which is the right approach, because it is a very technical matter. However, we badly need clarification of policy in a sphere that is arcane but extremely important for business and investors. The Government have created a great deal of confusion.
We need more reflection and more time so that we can absorb some of the lessons available from the pensions sector. It is understandable that pension funds—both occupational schemes and general pension funds—should be exaggerating the difficulties created for them by the Budget. Undoubtedly, however, the difficulties are very real. Many occupational pension schemes are in serious financial trouble. One of the consequences will be that British business will have to increase considerably the amount that it pays into the schemes. There will be a considerably increased overhead for British business, coinciding with higher interest rates and a higher pound. Clearly, major economic policy implications have not been thought through.
It is not at all clear that the Government have understood the way in which business has changed over the past 20 or 30 years, since corporation tax was introduced. It has been assumed too glibly that change in the ACT provision will have the predicted effect of encouraging retention of investment rather than distribution of dividends. The change may have the exactly opposite effect, because many companies will expect their investors to continue to receive the same after-tax return. If they have that objective, the effect will be to reduce rather than to increase investment in companies. Those matters clearly will require more mature reflection, and guillotining debate on them will not help.
Most of the general debating points on the windfall tax have already been made and were well advertised. What was not well advertised, however, was the way in which the windfall tax will operate. The Government have now chosen a specific formula, based on excessive profits in the four years after flotation. That was one of several methods that could have been chosen, and it is not necessarily any better or worse than any other method. As that method has been chosen, however, there will clearly be enormous differences in the way in which incidence of the windfall tax is determined.
One or two of the anomalies of choosing that method are already coming to light. Utilities such as Thames Water, which went on an enormous spending spree immediately after privatisation, for example—imagining themselves to be big, global businesses diversifying out of their core business, making massive investments and reducing their profits—will have to pay less windfall tax than very prudent utilities, such as Seeboard, which stuck to their core business. Those companies will be penalised for running a business more sensibly than some of the others. That is a direct consequence of the chosen formula.
Another consequence of the chosen method is that utilities that paid out much higher dividends in the period immediately after flotation will have to pay less windfall


tax than those that kept the cash and reduced their interest burden. Those are second-order consequences of the tax, which Ministers have not started to think through.
The main justification given for the windfall tax was that it would increase fiscal fairness—a general sense of justice—and Liberal Democrat Members support that broad principle. As is well known, in principle, we are in favour of taxing not only fat cats, but fairly plump ones. The overall Budget package, however, will do little for taxation of the very rich, including those who benefited from the original utility privatisations.
I do not know whether anyone has tracked down people such as Mr. Cedric Brown to discover their current whereabouts—which could as easily be Marbella as Margate. If one asks what the Budget will do to a multi-millionaire such as Cedric Brown, who profited from the original privatisation, the answer is probably very little. He will pay a little more petrol tax to power his Jaguar, but he will still pay the top-rate tax of 40 per cent. on his earned and unearned income. although he will now be drawing substantially more in interest income from his large financial deposits. The Budget has not done anything to inconvenience real fat cats, and that is one of our major criticisms.
It is extraordinarily presumptuous of the Government to claim that the Budget is green, and that that is one of its primary achievements. Increase in petrol tax is the primary measure which could be described as green. There is nothing fundamentally wrong with an increase in petrol tax, but of all the taxes that could be introduced, we know that such a tax will have the least effect on environmental behaviour. All the research that has ever been done on taxation shows that there is little response in consumption after higher petrol taxes have been imposed.
Paradoxically, by simultaneously cutting value added tax on fuel, the Government may have introduced a type of negative carbon tax. The increase will have done the exact opposite of what the Government promised in New York to do—to provide a bold new lead on environmental policy. They have achieved the opposite result of what they intended.
There is a possibility that the Government will indirectly achieve the result that they desire for the environment—to reduce pollution—because manufacturing industry's output may be slowed substantially. If exchange rates and interest rates rise, output will fall, and pollution will fall with it. We may therefore achieve a desirable outcome environmentally, but only as a consequence of mismanagement of the economy, with all the damaging economic side-effects.

Mr. Graham Stringer: I support the Finance Bill and last week's statement by the Chancellor of the Exchequer. However, before explain my support in detail and why I think that the Bill will be extremely good for my constituents in Manchester, Blackley, I should like to make an observation on Opposition Members' criticisms of the Budget.
I have listened to Opposition Members' speeches—some of which contained some pointed and detailed analysis, which I shall not deal with in detail—and much of their criticism contained words such as "profligate" and

"socialist". Some Opposition Members even said that it is a "traditional Labour Budget". Simultaneously, however, other Opposition Members criticised the Budget because it does not impose sufficient taxation. The Opposition's arguments are in direct conflict with each other.
I have come across opponents in other contexts who have used two completely conflicting arguments, the most recent case being that of the second runway at Manchester airport. Until 1 June, I chaired the company involved in that project. Like the Conservative Opposition now, the opposition in that instance wanted it both ways: they were opposed to the second runway because it would make the airport too large, but they also said that the second runway was not needed as no one would fly there. When conflicting arguments are being used by the same people, it means that the opposition have no coherent view or objective.
It is therefore not surprising that some of the difficulties that the economy is experiencing at the moment were caused not only because the Conservatives' analysis of what was happening was schizophrenic, but because the Conservative party is wholly split. The previous Chancellor did not make, or refused to make, the decisions that should have been made earlier this year because he was in a minority in his party and because his party and the Government were split. That is one reason why the Bank of England is now raising interest rates.
I do not agree with everything that my hon. Friend the Member for Brent, East (Mr. Livingstone) said in the debate on the Budget last week, but I agree with his basic analysis. Even if my right hon. Friend the Chancellor had not made a speech at all, the situation would still have been considerably better than what has happened in the past 18 years. However, the Chancellor did make a speech, and it contained a number of important commitments that take us in a completely different direction in comparison to previous Budgets. The welfare-to-work programme, the provision of training for people to look after children, and the commitments given to the long-term unemployed will go to the heart of many problems in my constituency.
In the past 18 years, we have experienced a cycle of boom and bust. At times, some of the population have done extremely well, while others have not. While the economy in parts of the south-east has done well, there has been an increasing differential between people who live in the inner city—in, for example, Manchester, Blackley—and those who do not. The measures that the Chancellor has introduced will start to alleviate many of the problems, but it will be a difficult task, as there have been 18 years of problems.
As has been explained, not everyone who is unemployed is in the same position. Not only have Conservative Budgets done nothing for people in the inner cities, such as those whom I represent, but the Conservatives introduced a battery of legislation, which has made the position considerably worse. Members of some families in my constituency, who were children in the recession in the early 1970s during the oil crisis, have not worked. They left school, but did not go into employment as their parents had done. They have had children and those children have now gone through school. They have not managed to find employment and now have children themselves. There is a cycle of


deprivation. Those people have been hurt not only by the normal economic cycles, but by the battery of previous legislation.
I shall cite three examples of legislation that has impacted differently on people who live in the inner cities and those who live outside, especially in the south-east of England. When the poll tax was introduced, 80 per cent. of residents in my constituency ended up paying more than they had under the rating system—and they were some of the poorest people in the country. Legislation adversely affected people who had managed to get themselves off benefit and out of unemployment.
Another example of such legislation was directed at local government and included the requirement to introduce compulsory competitive tendering. That policy attacked people's wages, and the competition from outside companies has often been unfair. For example, companies contracted to clean buildings sometimes paid half the wages that the council had paid. There are many discussions about the minimum wage and, whatever figure is finally arrived at, many councils—Manchester city council in this case, but the same applies to many large councils around the country—are not too much out of line with what might be considered. In any event, the new requirement meant that people either became unemployed or saw a drop in their standard of living.
Legislation to ring fence housing finance was introduced at the same time as the poll tax. In Manchester, it meant a 30 per cent. increase in rents, even though that was quite contrary to what the then Minister said. The Government refused to take into account the fact that in previous years repairs had been capitalised, so they assumed that the subsidy was much less than it was.
People living in the inner city have had a difficult time. I greatly welcome the welfare-to-work proposals, but it will not be easy for young people leaving school to take up employment. The culture of employment has disappeared in many families. Now, the third generation of some families will find it even more difficult to take up employment because they have left it a long way behind.
The official statistics show that the economy has been improving for five years. Whether or not one accepts the absolute nature of those figures, there is no doubt that more people are employed now than were employed five years ago. However, what has been masked is the fact that most of the growth in the economy has left behind many people in the inner city. It is only by targeting training and getting those people into employment that we shall stop the cycle of deprivation. I welcome the Budget. It will be hard work getting people back into employment, but the Budget is a start.
I wish to examine three taxes, one in detail and in response to the hon. Member for Twickenham (Dr. Cable). I welcome the fact that the Chancellor has been cautious on green taxes. There is no doubt that we as a party are committed to improving the environment and reducing the greenhouse gases that will have consequences for us all if we do not do something about them. However, we have to be very cautious, more cautious than many Liberal Democrat manifestos have been. If one wants to introduce green taxes, the simplest and easiest thing to do is tax the poorest people. It is the nature of many green taxes that they are regressive. I welcome the cautious start that has been made, so that when we take further action on the environment, we are more likely to get it right.
I also want to talk about duty on tobacco and, in more detail, duty on alcohol. The Chancellor said that he would put those taxes up by the rate of inflation, but that there would be a review. I welcome that review of alcohol duties. When I was selected for Manchester, Blackley, because of the boundary changes, it took me a little while to realise that I had gained two breweries and a prison.
Employment in the prison is fairly secure—although one might wish that it did not have to be. However, there is an increasing employment problem in breweries because of unfair competition, which the Chancellor recognised. The problem is not just individuals going across the channel, but businesses employing people to go and bring back duty-free beer and wine to sell unlawfully in unlicensed premises. We might expect that to affect employment in Dover, on the south coast or near ports, but it is also affecting employment in the retail industry elsewhere. One pub near my constituency has had to close because of the competition from an illegal seller of liquor brought from across the channel.
Something has to be done about that. I do not criticise the police for not putting all their resources into chasing those who have brought over liquor for retail rather than for personal consumption. If the police know about it, they will do something about it, but they have other priorities and I cannot ask them to make that the top priority. However, the review announced by my right hon. Friend is welcome because there is a long-term difficulty. The amount of taxation on cigarettes that is lost is estimated at more than £1 billion. I suspect that the figure for alcohol is not dissimilar.
Like many Labour Members, I have argued for a long time that it is better to tax pleasant consumption such as alcohol rather than to tax people directly. However, if that tax is inefficient and if keeping it high is putting people out of work here in favour of employment on the French coast, the problem needs to be examined in detail. In the increasingly global economy in which the transportation of people and goods is ever easier, there will be more examples in future than just tobacco and alcohol.
I welcome my right hon. Friend's Budget and support the Bill. It is excellent news for people in the inner-city areas and the other parts of my constituency.

Mr. Michael Fabricant: I am grateful to have caught your eye at this late moment, Mr. Deputy Speaker. I have been trying to participate in this debate, but I had understood that there was a surplus of people wishing to take part. Having been a parliamentary private secretary at the Treasury for a year and a half before the election, I am glad to be able to contribute to the debate.

Mr. Boswell: Does my hon. Friend feel that his difficulties in getting in because of the move from surplus to deficit underline the problems of economic management encountered by anyone on any Bench?

Mr. Fabricant: My hon. Friend puts his point rather well in his own way. The lack of people in the Chamber today demonstrates the disappointment that there has been about the Budget. The whole Budget has been rather


gimmicky. We do not have a Red Book any more—it is a white book with pretty pictures. The title of the Red Book is "Equipping Britain for our long-term Future."

Mr. Tim Loughton: An omission statement.

Mr. Fabricant: As I hope to point out, it is not a mission statement and nor does it deal with the long-term future.

Mr.Loughton: An omission statement.

Mr. Fabricant: As my hon. Friend says, it is an omission statement.
The Budget has been filled with gimmicks from beginning to end. We have heard about Freepost Budget 97. I shall table a question to discover how much that will cost the Exchequer. The gimmicky regime was established by the Chancellor's decision not to turn up with top hat, white tie and tails—let alone Ginger Rogers—for the Mansion House speech. One could argue that that was quite a discourtesy to his hosts.
I welcome some aspects of the Budget, such as the 2 per cent. cut in corporation tax and the increase in first-year capital allowances. I particularly welcome the measures to improve the prospects of the United Kingdom film industry. Too often, Governments from both parties have forgotten the importance of the film industry to the United Kingdom as a dollar earner. In the United States, the film industry is reckoned to be the biggest export earner—bigger now than the aerospace industry, which is the second biggest.
However, the Budget is not for the long term, but for the short term. The changes in corporation tax capital allowances and advance corporation tax will shift investment away from industry in the United Kingdom towards overseas equities and property in the United Kingdom—a policy which is not green and will not help British industry.
The Chancellor's abdication of responsibility for interest rates has resulted in another interest rate rise today. Over the past year and a half, when he was the shadow of my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), the current Chancellor argued consistently that if interest rates were not raised there would be increases in unemployment and inflation. Six or seven times, he called for a rise in interest rates and my right hon. and learned Friend resisted. Did we see a rise in unemployment levels? No. We saw instead that the present Chancellor's judgment was wrong. Did we see a rise in inflation? No. Instead, we saw that the judgment of the present Chancellor was wrong. That demonstrates the weakness of his argument then and now.
The Chancellor clearly has doubts about his own judgment. As soon as he became Chancellor, rather than taking responsibility for interest rates he gave that responsibility to the Bank of England. Much though I like and respect Eddie George, he is no Governor of the Federal Reserve—he is no Alan Greenspan. Mr. Greenspan, who has such independence, has shown judgment over many years, giving strength to the dollar. The difference is not just one of personality and

experience, but of definition between the responsibilities given by the President of the United States to the Federal Reserve and those given by the Chancellor of the Exchequer to the Governor of the Bank of England. Mr. Greenspan has been given the authority to consider the welfare of the whole United States economy—not just inflation, but growth as well. Eddie George, on the other hand, has been given a very narrow remit, being told to consider inflation alone. That is a fundamental weakness.
I know that it is not proper to give recommendations in the House about share purchases, but I shall give one. I know a printing firm in Rugeley—which is no longer in my constituency—which currently has a pretty low share value, but anyone buying shares in it now will get a good deal. In two, three or four years' time, the value of those shares will be much higher, because the company has stockpiled car bumper stickers reading "Don't blame me, I voted Tory". It may be a year or a year and a half before the effects of the Budget feed through into people's pockets, but they will, and the Labour party and the Chancellor of the Exchequer will regret having given independence to the Bank of England.
I asked the House of Commons Library for some information before today's interest rate rise of a further 0.25 per cent. was announced. Informed sources tell me that there is bound to be another increase. According to the Library, before the rate rise announced today, the average home would be incurring an extra tax, as it were—an extra Labour tax—of £120 per annum on the 0.5 per cent. increase since the last Budget.
I am sorry; that refers to the reduction of mortgage interest relief at source—MIRAS—to 10 per cent. In fact, the extra 0.5 per cent. has cost even more. It is equivalent to another £229 a month. In just eight weeks of Labour government, there has been a significant increase: £229 a month. plus that £120 per annum. That is just the beginning, however. It has all happened because of the Chancellor's abrogation of responsibility for interest rates.

Mr. Geoffrey Clifton-Brown: Has my hon. Friend noticed a further aspect of the Chancellor's abrogation of responsibility to the Governor of the Bank of England, as announced in the Mansion House speech? Whereas the last Government had an absolute inflation target of 2.5 per cent., the Chancellor has now given the Governor latitude to go up to 3.5 per cent. before he need explain himself. Might not the figure rise to 4.5 per cent. next year, and 5.5 per cent. the year after?

Mr. Fabricant: My hon. Friend makes a valid point. That target is as flexible as the Maastricht criteria for entry into economic and monetary union, and I believe that it will result in increased speculation on the value of the pound.
Before I became a Member of Parliament—and I only became a Member of Parliament in 1992—I was in business. I was a manufacturer involved in exporting, and I had to make judgments on the value of the pound. I exported into Europe, the far east and the United States of America. As someone who was not only an exporter but a manufacturer, I can say that the increase in the value of the pound will not help manufacturers and exporters.
In today's Treasury questions, the Chancellor seemed not to accept the existence of a close relationship between interest rates and the value of the pound. That demonstrates


either his deliberate lack of understanding of how the economy works, or the obtuseness that he and his leader, the Prime Minister, always seem to develop when they are asked pertinent questions.

Mr. Robert Syms: I thank my hon. Friend for allowing me to interrupt his eloquent speech. He mentioned higher interest and exchange rates. As one who represents a constituency in the midlands—which is a key area for manufacturing jobs—does he agree that, in the long term, this policy mix will lead to higher unemployment, lower production in manufacturing, fewer exports and a very unsatisfactory position for our national economy?

Mr. Fabricant: My hon. Friend is entirely right. He is a man of judgment. He used to be a builder—unlike Labour Members, who I suspect never genuinely earned a penny in their lives other than as researchers, failed polytechnic lecturers and social workers. My hon. Friend actually made things and his question contained an insight that demonstrates Conservative knowledge and the decisions that we would be making if we were in government.
What my hon. Friend did not mention, however, is that manufacturers in my constituency in the west midlands—and, indeed, in Poole—will find it difficult not only to export, but to invest. Cash flow is all-important to people who run businesses, especially small businesses. Although, as I said earlier, I welcome the 2 per cent. drop in corporation tax, I cannot welcome interest rate rises that will deter investment.
In The Gazette—the publication of The John Lewis Partnership—Mr. Brian O'Callaghan, the director of trading of the department store division, was quoted as saying in his report to the chairman on 18 June:
at week 17 we were cumulatively 9.5 per cent. ahead of last year and 2.8 per cent. ahead of estimate … Hard furnishings emerged as the directorate with … the fastest rate of growth".
That demonstrates that people are currently investing in what could he described, from an individual's point of view, as capital items—furnishings, white goods, and so forth. That must be encouraging. The John Lewis Partnership, for example, is keen to sell British products.
It must be said, however, that that, too, will be affected by the increase in interest rates. It will dampen the house market. People will say, "I am afraid that we must conserve our income." People out there are not fools. If, after just two months, a Labour Government can cause such damage in a Budget, what on earth will they do in their next Budget?
I was amused earlier today when, in Treasury questions, the Treasury team was asked whether it would produce the Green Paper in which, before the election, it had promised to discuss the environmental impact of the Budget. What was the answer? The answer was "No, we are not breaking our election promises. We will publish the Green Paper on the Budget when we have a real Budget. We will publish it when we have the main Budget, in April. The Budget that we have just had was just a temporary, emergency Budget."
My God! If this Budget, given all the damage that it will do to the economy in the long term—thrusting investment into overseas equities, thrusting investment into property in London and elsewhere, thrusting investment away from local manufacturing and damaging manufacturing in the ways that I have described—is just a short-term emergency Budget, what on earth will the real Budget do in April?

Mr. Syms: My hon. Friend mentioned interest rates. It is clear that higher interest rates will have a bad effect on

local authorities, because they are major holders of public debt, and many are already at their capping limit. There will be a huge impact on the provision of services. Combined with pension costs—many local authorities will have to spend further millions of pounds to cover the pensions of their employees—will not the higher rates have a detrimental effect on the provision of police and fire services, schools, social services and all the other important services that we all care about?

Mr. Fabricant: My hon. Friend is right. Yesterday, Staffordshire Members of Parliament—Labour and Conservative—had a meeting with their Labour-controlled county council. I asked the county treasurer whether any provision had been made for the pension scheme. Was the Prime Minister right in saying that the Budget would have no effect on pension schemes? Was he right in saying that the effect was incalculable?
Next year, £1.5 million will be taken out of Staffordshire county council's budget. It will be taken out of the budget for education or roads—otherwise, council tax will have to be put up, because of the effect on pension schemes. Is Staffordshire county council one of the biggest county councils? No. It does not even include Stoke-on-Trent any more; it is a unitary authority. It is one of the smaller county councils.
I wonder whether some of the Labour Members who are sitting over there looking smug have asked their county treasurers the same question. I invite them to intervene in my speech. Has any Labour Member asked his or her county treasurer what impact the Budget and the changes in ACT will have on their spending plans? Either Labour Members did not ask the question or, worse, they asked it, got a bad answer and, being in fear of Mandelson Towers, they are unable to intervene.
It is a time-bomb Budget. At first, even I was dazzled by it. I sat there thinking that it did not seem too bad. After all, it produced a decrease in corporation tax—I could not argue with that—and an increase in capital allowances in the first year. My hon. Friend the Member for Macclesfield (Mr. Winterton) and I have always argued for that. It then went into a number of complications which bemused and bedazzled Members on both sides of the House. However, it took just one day for The Economist to produce a front cover showing a glowering iron Chancellor and the headline, "A disappointing start".
I advise you, Mr. Deputy Speaker, to buy those shares in the printing firm that I mentioned. Anyone who buys shares in a printing firm that produces the bumper sticker, "Don't blame me, I voted Tory" will find that commodity in great demand not next month, not in six months' time, but, mark my words, in a year or a year and a half from now.

Mr. Gareth Thomas: I welcome the Finance Bill and I congratulate my right hon. Friend the Chancellor. In marked contrast to Budgets produced by the previous Government, it is long term in its vision. I commend that long-termism. The Budget is long term in respect of growth and stability, reducing high unemployment, tackling inflation and, perhaps most significantly, in its approach to the environment. After all, what can be more long term than the environment and the conserving the finite resources of the planet?
The Budget has at its heart a strategic approach to sustainable environmental policy. A few years ago, the Rio conference defined sustainability as the necessity for the present generation to fulfil its needs from this planet without undermining or prejudicing the needs of future generations. That is long-termism in a deep sense.
The Budget contains green measures. I agree with my hon. Friend the Member for Manchester, Blackley (Mr. Stringer) that we must take a cautious approach to green taxes and that we must be mindful of long-term side effects, in particular the social costs of green taxes; however, the Budget contains a number of judicious measures that auger well for the future.

Mr. Loughton: The hon. Gentleman referred to green taxes. If the Budget was such a triumph of greenism, can he explain why Greenpeace and other environmental agencies described it as disappointing at best and why the following day one of the biggest movers on the stock market was the oil sector, which might not have been expected to benefit from such a hike in effective taxes on oil? How does the hon. Gentleman explain that?

Mr. Thomas: The Budget had all the hallmarks of statesmanship, and statesmanship requires drawing a balance between the need for an effective, competitive economy and the long-term effects on the environment.
I shall now focus on specific measures that may interest the hon. Gentleman and are of particular relevance to my constituency where mineral extraction forms an important part of the economic infrastructure. Mineral extraction, quarrying and the dredging of aggregates have a damaging impact on the environment. I welcome the provisions in the Finance Bill for a full evaluation of the environmental costs of quarrying. My constituents who live in the village of Eryrys near the quarry of Pant-y-Gwylanod will welcome the Government's declared strategic intention for the tax system to reflect the environmental impact of quarrying.
My constituents will also welcome the Government's commitment to research the costs involved and the environmental impact of water pollution. It seems eminently sensible that there should be further work to devise a regime whereby the polluter will have to pay. A great body of opinion would like policy to move in that direction.
The increase in the duty on road fuel of 6 per cent., in line with inflation, will help us achieve our international obligations to conform with the target of reducing CO2 emissions by 2010. That measure also has a great deal of support in the country.
I welcome the reduction in vehicle excise duty for lorries with clean exhausts—those that do not pollute the environment with hot air. The hon. Member for Lichfield (Mr. Fabricant) may be interested in that. The Government intend to extend that indulgence to buses. That can only improve the quality of public transport and the local environment.

Mr. Clifton-Brown: Does the hon. Gentleman really think that any of the measures in the Budget will help us meet the international targets to which the Government are committed? Surely the 6 per cent. real duty on petrol

will simply put the poorest people in rural areas at a complete disadvantage while relatively wealthy people will continue to use their cars.

Mr. Thomas: As I said earlier, the Bill has taken a judicious approach. It sends clear signals that environmental bads will be the subject of separate tax regimes, and in the long term it is possible that the tax system will encourage environmental goods. It is eminently sensible and it is what the country wants. We all have a stake in our environment. Nothing can be more long term than the Budget's approach to the environment.

Mr. Fabricant: rose—

Mr. Deputy Speaker (Sir Alan Haselhurst): Order. Has the hon. Gentleman finished his speech or is he giving way?

Mr. Thomas: I have finished my speech.

Mr. Deputy Speaker: That is what I understood.

Mr. Tim Loughton: After all the hours that I have spent listening to the debate on the Budget and the Finance Bill, both in the Chamber and in my office, it is clear that the Budget lends itself to a great deal of metaphor and analogy. For me, the best analogy is a cake—a large cake, liberally deluged with bucketfuls of rich, squidgy chocolate fudge. On first sight, it provokes applause and slavering on the Government Benches, but it will bring only regret later, even to those who have sampled just a modest slice. It is a veritable death by chocolate fudge. It is a cake that we are told that we can have and eat as well. We have been treated to some extraordinary sights by the new proprietors of the cake shop on the Labour Benches who are churning out fudge.
We have been told that the abolition of advance corporation tax is so harmless that no one will suffer. It is so harmless that, in fact, as we were told by an hon. Member yesterday, no one understands—least of all Labour Members, who are not even able to spell it—that the effect on local authorities will be considered but that the shortfall will not necessarily be made up. Fudge and no fudge.
We were promised a Budget that rewards long-term investment, but the irony is that pension funds have been pilfered in the short term for short-term gain, so that prospective pensioners will face long-term pain from the holes in their pension funds when they need to draw on them when they come to retire. Fudge today, gone tomorrow.
Surely the most extraordinary sight of all over the past week has been that of the Chief Secretary to the Treasury, who last week and again today in Treasury Questions said—it was repeated by the Prime Minister yesterday—that the Government have measured the claimed success of their debut Budget by its effect on the stock market. Who would credit it, least of all those in the City? Perhaps I should at this point declare an interest as a director of a fund management company for some years.
We are now faced with the sight of new Labour, new stockbrokers' friend. I presume that the rather sparse turnout on the Labour Benches for this debate is due to


the fact that the City is empty because many have gone to Hyde park and Labour Members have flooded to tailors in the City to be kitted out in the loudest chalk stripes and pinstripes going. I confidently predict that, in a matter of weeks, the little pink ribbons attached to our coat-hangers in the cloakrooms downstairs will be a sea of City bowlers as the new stockbrokers' friends on the Labour Benches claim their places.
Let us indulge ourselves for a few minutes, play the Government's game and consider what the stock market has done over the past eight days between the Budget and the close of business today. Let us look at what that temple of Mammon, as the Labour party would have us know the City, has done since Labour's first Budget. Despite all the hype, the Financial Times all-share index has gone up by 0.26 per cent. since the close of business the day before the Budget. That is not terribly impressive, but it has gone up all the same.
Let us look at some of the biggest losers. The biggest fall on the stock market over the past eight days has been in shares in the engineering sector, which have fallen by more than 5.5 per cent. Is that any surprise when we read the headline in the Financial Times—we know that everything in the Financial Times must be true if it has anything to do with the Government—
Strong pound hits manufacturing
Biggest monthly fall in engineering output for a decade".

Mr. Syms: My hon. Friend has raised an interesting point. We had a rise in interest rates today, yet a fall in manufacturing the day before yesterday. Is not that a very bad policy mix? Is not that very bad news for anyone looking forward to a future of high employment?

Mr. Loughton: I bow to my hon. Friend's greater expertise as somebody who has been involved in manufacturing for many years. He is absolutely right. The complete failure of a selective fiscal tightening in the Budget has had a direct impact on the value of the pound. We have seen sterling soar in the recent past. In fact, in the past eight days since the Budget, the sterling trade-weighted index has risen by no less than 2.5 per cent. As my hon. Friend says, interest rates have gone up again today—the third increase since the Government came to power and the third increase in less than three months. Today has seen another piecemeal increase yet we know that piecemeal increases are not enough, as the City will tell us tomorrow.

Mr. Geraint Davies: Is not the level of the exchange rate linked first to the phasing of the British economy's growth cycle vis-á-vis the German one, when we are at a peak and they are in a trough, and secondly to the sentiment of the market with respect to whether a single currency will go ahead on 1 January 1999, considering that the convergence criteria may not be met, especially by Spain and Italy? Those are the informed views in the market. It is not what you say about the Budget somehow impacting on exchange rates. It has not impacted significantly on exchange rates. I put it to you that manufacturing is being hit slightly as a result of the exchange rate, but that has nothing to do with the Budget. The Budget was about setting the parameters for

stable inflation to ensure stable exchange rates for the sustainable future. We can actually have profitability. What you are saying is complete and utter rubbish.

Mr. Deputy Speaker: Order. I remind the hon. Member that he is addressing the Chair when referring to "you" and not the hon. Member for East Worthing and Shoreham (Mr. Loughton).

Mr. Loughton: I am grateful to you, Mr. Deputy Speaker, for intervening on the gushing new stockbrokers on the Labour Benches. I fear—although I do not know the hon. Gentleman's background—that he is talking complete and utter claptrap. Sterling is approaching a crisis of inverse proportions. A sterling crisis when sterling goes up can be just as harmful, if not more harmful, to British industry.
The reason why sterling has been shooting up in the past couple of weeks is that the City and the speculators have this Government sussed. They know that the Government will have to put up interest rates. The City, the experts and the professionals, whom the Opposition ranks are queuing up to join, know that the Government have abandoned so early in their governance a tight inflation policy. What does that lead to? It inevitably leads to higher interest rates. One does not have to be a Mr. Soros to work things out. They have got the Government sussed. It is a one-way ticket and that is why sterling is going up.

Mr. Geraint Davies: rose—

Mr. Loughton: I should like to continue. We do not want another lengthy intervention.
The intervention of the hon. Member for Croydon, Central (Mr. Davies) is endemic of the new ethos that the Government have tried to thrust on us: "Not me, guv, it's the Bank of England." Within days of coming to power, they handed over control of monetary policy. They said, "We think that you can disentangle monetary policy from fiscal policy, so don't blame us—it is down to Eddie George and the Bank of England." That is the point that the hon. Gentleman was trying to make.
Time and again at Treasury Question Time this afternoon, colleagues of the hon. Member for Croydon, Central reinforced the dramatic impact of the exchange rate on British industries in many depressed areas and in many strong Labour seats. The hon. Gentleman's hon. friends know them well. For example, 60 per cent. of British Steel's trading profits are sensitive to movements of the Deutsehmark and pound exchange rate. The appreciation of the pound by more than 10 per cent. against the Deutschmark over the past six months has blown an enormous hole in the budgeting and economies of such companies. Pilkington plc is another large UK employer and former FTSE company, and more than 70 per cent. of its trading profits are sensitive to the deutschmark exchange rate. Such companies will be crucified.

Mr. Fabricant: Will my hon. Friend join me in paying tribute to the hon. Members for Rotherham (Mr. MacShane) and for Alyn and Deeside (Mr. Jones) who today said that the increase in interest rates and the


increase in the value of the pound—solely arising from the abrogation of responsibility by the Chancellor—were damaging the steel industry in their constituencies?

Mr. Deputy Speaker: Order. I remind the hon. Gentleman that he must address the Chair.

Mr. Loughton: I am grateful to my hon. Friend for that point. The two hon. Gentlemen that he mentioned are forthright and honest, and I hope that the Treasury team will listen to them. I know Rotherham well and I know its dependency on steel manufacturing and heavy capital goods industries. Those are exactly the businesses that are suffering badly and will continue to do so as we increasingly approach a sterling crisis for which the Government must take responsibility. They cannot shrug their shoulders and take the "not me, guv" approach that we have seen so far.
What have we seen? The pound goes higher, exports go down and the Budget predicts that export levels will decrease next year and the year after. Inversely, the import levels are predicted to increase next year and the year after, which is a serious recipe for inflationary pressures and therefore for further interest rate rises. Exports will continue to suffer because the pound is high, and industry's borrowing costs will continue to go up. That is a treble whammy for British industry.

Mr. Tony McWalter: Since you mentioned fiscal tightening, will you explain to us—I am sorry, Mr. Deputy Speaker—will the hon. Gentleman explain exactly the level of income tax rise that he wanted to see? Would he have raised the standard rate of income tax by 1p, 2p or 3p? That is the implicit message that he is giving the House.

Mr. Loughton: I am sure that if the hon. Gentleman wished to address his question to you, Mr. Deputy Speaker, you are as capable as I am of giving the fundamental lesson in economics to Labour Members that they so desperately need. I shall come on to the subject of personal taxes a little later, if I may continue without being interrupted.

Mrs. Liddell: Will the hon. Gentleman give way?

Mr. Loughton: For the last time.

Mrs. Liddell: That is very gracious of the hon. Gentleman. When he comes on to the subject of personal taxation, and given that he has been following the debates on the Budget so closely, will he give us his view on the point made by the hon. Member for Grantham and Stamford (Mr. Davies) in his lengthy contribution?

Mr. Loughton: I shall be delighted to deal with that point later, and also with the Economic Secretary's performance at the unit trust dinner in the City last night. Apparently, she alienated no fewer than 1,500 fund managers with a Ladybird-book ABC version of how the City works. If that is the calibre of economic management and understanding of how the City works to which the

new Government are going to treat us, I fear that they misunderstand basic economics and the City's role as a major fund earner and manager for the country.
If I may continue, I can tell the House that I understand the problem that exporters face from my experience in my constituency. One of the major employers is SmithKline Beecham and another is Edward High Vacuum, which is one of the most profitable parts of the BOC Group, a major FTSE company. Another is Ricardo Engineering which is a major listed company. All those companies export the majority of their products and they are all suffering. They constantly tell me about the pain they will continue to suffer and the Government's "not me, guv" attitude is no recompense for them.
On a more cheery note, what went up in the stock market? The Government want us to believe that the stock market is jolly and everything in the garden is rosy. One of the sectors that has seen the biggest rises in the past eight days is the property sector. Yet the Budget was meant to put a cap on the speculation and short-termism that afflicted the property market, so we are told, in the 1980s. That is why the Government tinkered with MIRAS and why we had the grand gestures on stamp duty. What effect have those changes had? Property shares have rocketed and property prices are going up. Why? The answer is simple. The Government hoped that most people would understand the changes to ACT, but if a fund manager invests in equities and will lose the ACT credit, he will look around for other forms of investment. At the moment, the commercial property market is yielding in excess of 7.5 per cent., without the downside of ACT. Surprise, surprise, property prices will go further through the roof and that has been reflected early by the rise in the property sector on the stock market. That is another inverse reaction compared with what the Budget, or so we were led to believe, was supposed to achieve.

Mr. Syms: Some 55 per cent. of the value of pension funds is invested in UK equities, and the change in the tax regime will inflict a body blow on those pensions. Does my hon. Friend believe that this will mean greater investment not only in property, but in foreign equities and economies?

Mr. Loughton: I am grateful to my hon. Friend for hurrying me along to a point that I intended to make and to which I shall come shortly.
I wanted to deal with one of the Government's favourite bêtes noires—as far as the rest of the House is concerned—the windfall tax. The utilities sector has gone up in the stock market, which is not what one might have expected. But it has lagged behind the rest of the stock market for many months because of the threat of the windfall tax. It has gone up by 1.8 per cent. If the utility companies have been so despicable, evil, fat-cattish and exploitative in wanting to grab higher charges from the consumer, why are the Government not instructing those companies to give back the equivalent of the windfall tax to the users of electricity, water and other utilities? Surely that would be much fairer than grabbing it for themselves for their own pet projects where, as we know, it will be wasted.
One has to query whether the Government trust the regulators. whose appointment they were happy to go along with. The whole point of having regulators to


regulate monopoly or near-monopoly utilities is that they are the ultimate arbiters to set fair prices for the consumers. As the rug has been pulled from under the feet of those appointed regulators, are we going to see a swathe of sackings among them in the next few weeks?
In the year 2000—when many of the electricity companies must renegotiate the prices they will be allowed to charge consumers—a key criterion within that policy will be the level of borrowing. Many of the electricity companies do not have large pots of ready cash, and will have to increase their borrowings to pay the windfall tax. That will be a part of the consideration when prices are considered. QED—it does not take a mastermind to work out that prices, and the consumer, will suffer yet again.
Another point that the shadow Chancellor, my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley), has made on a number of occasions is that if the Government accept that bringing in the welfare-to-work scheme to create false jobs with subsidies will work, they must equally accept that loading businesses with the type of social contract implicit in the social chapter can only destroy jobs. The Government have been quiet on considering the other side of the coin.
We must consider briefly two more sectors. Another strong mover in the stock market in the past eight days has been the alcoholic beverage sector—the sparsity of Labour Members in the Chamber today may account for the strong performance of that sector—yet we were promised that the Budget would give careful consideration to alcohol duties. The preamble to the Budget raved about alcopops, and yet one of the biggest movers on the stock market has been the alcoholic beverages sector.
I am delighted that Labour Members are listening so intently to this pep-talk on how the stock market works, because they are obviously interested in entering that circle. Only this afternoon, the Chancellor claimed that he had cooled down consumer demand.

Mrs. Liddell: Will the hon. Gentleman give way?

Mr. Loughton: Yet again. I shall give way graciously.

Mrs. Liddell: The hon. Gentleman seems to be getting near to his wind-up. We have asked on two occasions for him to give his views on personal taxation. I specifically asked him if he would give us his view on the points raised by his hon. Friend the Member for Grantham and Stamford (Mr. Davies) and those of other hon. Members who referred to personal taxation. Which aspect does he agree with?

Mr. Loughton: I am grateful for yet another intervention from the hon. Lady. My hon. Friend the Member for Grantham and Stamford (Mr. Davies) went on at length because, having experience in the City, he knows the subject well. I watched most of his long speech on television intently, after the news bulletin. The hon. Lady may be referring to the fact that he advocated that the Government should abolish mortgage interest relief altogether. That is not a view I share. My hon. Friend is not a member of the Front-Bench team and is not in a position to advocate such personal tax changes.
The final sector of the stock market about which I want to inform Labour Members is retailing. This afternoon, the Chancellor informed us that he had cooled down

consumer demand through personal taxes the like of which the hon. Lady might have been alluding to. Yet shares in some retailers have risen by 11.5 per cent. on the stock market in the past eight days. The key retailer, Dixons, announced yesterday that like-for-like sales of clever, foreign, imported, wide-screen gizmos were up by no less than 17 per cent.—yet another recipe for disaster for the import-export bill, inflation rates and, therefore, for what will have to happen to interest rates.

Mr. Syms: Does my hon. Friend agree that the high exchange rate will also help to feed the domestic boom in the high street because it will reduce the cost of many of the goods that people want to buy? That boom will become a major burden on our balance of payments and will continue to unbalance the United Kingdom economy.

Mr. Loughton: Of course, my hon. Friend is right. That is the thrust of what I have been trying to say. What was supposed to be a balanced and measured Budget has had completely the reverse effect. Judging from the reaction of Labour Members, I take it that they no longer want the flourishing or otherwise of the stock market to be their benchmark for the cleverness of the financial measures that they are proposing. So, will they listen to the stock market in future or not?
Another article in the Financial Times—that paragon of truth and leaked virtue—today, which was mentioned at Treasury Question Time states:
Cabinet set for U-turn on foreign dividends.
We have sort of been assured that there is no U-turn. If the Economic Secretary to the Treasury would like to intervene, I should be delighted for an answer on that one. Last Friday, the same publication showed that abolishing FIDs, foreign income dividends—another tricky speller—purely creates an irrecoverable tax charge unless companies are
mainly owned by foreign shareholders".
as the Budget red-white pretty-picture book put it the other day. That has two implications. As a leading FTSE company, RTZ, advocated last week, a company can either change its domicile overseas to somewhere like Bermuda or it can become the subject of a foreign takeover. Perhaps the hon. Lady would like to inform me. Is she encouraging British, blue-chip FTSE companies to change their domicile and taxation status to Bermuda or would she like them all to be taken over by foreign companies? I am genuinely interested to know because that is the implication of what the Government are advocating.
In conclusion—[Interruption.] and in response to the troop of mortis dancers behind me, I must briefly return to advance corporation tax and the pension funds, which my hon. Friends have mentioned many times. Every time that we mention ACT and its effect on local authority pension funds, we are told, "What a check the Tories mentioning local authorities." It is not a cheek that I am concerned about my county of West Sussex, where the changes to ACT will create a black hole of up to £4 million.
What would the Government suggest to those Conservative councillors who have recently taken back control, have returned serious amounts of money from the bureaucrats in county hall to the schools and overturned a ruling that would have slashed lollipop ladies' pay? Where would the Government make the savings?
West Sussex has the most pensioner private medical insurance schemes in the country. In the borough of Worthing alone, more than 1,000 people over the age of 60 are insured with BUPA. That is not a small number of people. Many people have come to me during the general election campaign and since saying that they will not be able to afford private medical insurance if the changes go through. That is in an area that, under the Government's formula, both before and after the general election, comes 98th out of 99 in the list of underfunded health authorities.
That is yet another example of how political spite would rather increase the waiting lists—just as, with the assisted places scheme, it would rather increase the numbers in the classrooms—than allow people the freedom to spend their money as they choose and save money for the national purse.
The Budget is a terrible case of attempted deception—of having one's cake and eating it. It is not good enough for the Government again and again simply to shrug their shoulders, say "Not me, Guv", and point the finger at the Bank of England to take responsibility when anything goes wrong. Ironically, the Budget represents a triumph of short-termism. Alas, when the real damage becomes clear to my constituents, they will be too old and it will be too late. I, for one, will continue to oppose the Finance Bill with vigour.

Mr. Ross Cranston: I have only five minutes to address the House, so I shall identify only a few points. When the right hon. Member for Wells (Mr. Heathcoat-Amory) opened the debate for the Opposition, I was unsure what their view of the windfall tax was and whether they still objected to it. Certainly, we have a mandate for it, and it is generally accepted. The other day, BG said:
We are not now predisposed to challenge a tax for which the Government has a popular mandate.
If Conservative Members want to go back in time in relation to the windfall tax, they must examine carefully their own policies which led to lax price controls on the utilities. That was an important element in our thinking. One estimate is that operating profits in the utilities in the period 1991–92 to 1992–93 rose by about 48 per cent. Customers paid a high price for Conservative laxity. I welcome the windfall tax, which redresses an injustice.
I hope that in her review of utility regulation my right hon. Friend the President of the Board of Trade will ensure that the utility companies do not pass on the effects of the tax in price increases. My right hon. Friend the Chancellor told the House the other day that he thought that that could be ensured, and I agree: consumers should not end up paying twice over for the behaviour of the utility companies. In Committee, we can discuss matters such as the formula for calculating the rates, but I shall pass over that at this point.
Conservative Members do not seem to take social justice into account. We heard earlier about the withdrawal of relief on medical insurance premiums. When that relief was introduced in 1991, it did not have the predicted effect and did not induce more people to take out medical insurance. The result is that our change is not the mean measure that

some Opposition Members have described but a recognition of the fact that it is better to benefit the many rather than the few.
Labour Members were interested by the remarks of the hon. Member for Grantham and Stamford (Mr. Davies), who suggested that mortgage interest relief should go completely, a sentiment with which I have some sympathy. It is an untargeted subsidy. While there is a case for some sort of mortgage subsidy, it should be more equitable.
Finally, I mention the encouragement that the Finance Bill provides through the reduction of corporation tax and the provisions for capital allowances. That is one aspect of the Chancellor's strategy to promote long-term growth. I am especially pleased with the provisions on films, which are in line with the recommendations of the Middleton committee and should enhance our position as a leading film-making centre.

Mr. Tim Boswell: This has been an interesting and good-natured debate enlivened by four remarkably good maiden speeches. The hon. Member for Bexleyheath and Crayford (Mr. Beard) spoke, as did all the maiden speakers, with dignity and courtesy of his predecessors. He also spoke eloquently about skills and his concern for small businesses, points that I was pleased to hear from a Labour Member.
The hon. Member for Upminster (Mr. Darvill) introduced hon. Members to—or in my case, because I was born in Brentwood, reminded me of—the area around Harold Hill. We were touched by his remarks. The hon. Member for Morecambe and Lunesdale (Miss Smith) introduced us to her superb constituency. My hon. Friend the Member for North Shropshire (Mr. Paterson), in a remarkably literate speech, brought in references to Caractacus and several ancient texts, as well as talking perceptively about modern manufacturing industry.
As time is short, I shall not mention all the other contributions, but I must mention the robust criticisms of my hon. Friends the Members for East Yorkshire (Mr. Townend) and for Grantham and Stamford (Mr. Davies), although not everything that the latter says commends itself to the Opposition Front-Bench team. My hon. Friend the Member for Chelmsford, West (Mr. Burns) made a forceful contribution on a narrow but important point about care provision. I hope that Treasury Ministers noted it.
My hon. Friends the Members for Lichfield (Mr. Fabricant) and for East Worthing and Shoreham (Mr. Loughton) also made interesting contributions, not exclusively but largely, centred on the importance of manufacturing industry. They were right to flag up their concerns, which are felt throughout the House by hon. Members who, like me, will keep a close eye on the engineering industry and the implications of the exchange rate for manufacturing industry. That was an important sub-theme of the debate.
In a bipartisan spirit. I should mention the speech of the hon. Member for Eastwood (Mr. Murphy), to which I attended carefully because we used to meet across the student table, as it were. I was interested that he began to invite the Government to tease out some of the details of the welfare-to-work programme. He and the Government will find that matters such as the 16-hour rule are not without complexity.
We are beginning to reach the end of the set-piece Budget and post-Budget debates. We are moving, and some of us are now ready to move, to detailed consideration. It is already clear to Conservative Members that the Chancellor's glitzy presentation—popular versions, Internet and all—has been found out. The Budget is coming to pieces in front of us.
To return to first principles, why are we having a Budget at all? There would have been no Conservative Budget. We do not need one. There is one only because a new Labour Government has been elected on a Labour manifesto. I concede that that manifesto gives them the authority and mandate to implement the windfall tax and the welfare-to-work proposals. Before the election, we did not have all the details that we have now because the Labour party would not tell us too much about their proposals. Even on Budget day, we did not have the details that we have now because even the details in the draft Finance Bill had already been rescinded by Friday last. One remembers how compressed the timetable is.
On Friday, the Paymaster General announced that an amendment would he tabled to a Bill which had not yet been printed. The amendment was described by him as a small matter to ensure that the
legislation does not inadvertently take into account profits that arose while companies were in the public sector, in circumstances where profits for the financial year straddling flotation have to be apportioned. It is quite clear what is intended."—[Official Report, 4 July 1997; Vol. 297. c. 586.]
I find that somewhat doubtful. It may be clear to some of the sharper of my hon. Friends, but it does not appear to have been clear to the Paymaster General or to the Government when they announced their proposals. Perhaps he knows now, and will explain it in Committee.
This afternoon, the Leader of the House suggested that the draft Bill published on the Friday of the debate was some sort of consultative activity and that that discharged her responsibilities to provide a reasonable timetable. Communications may be slow in my part of the world, and I apologise for not being connected to the Internet yet, but many of us did not get on with scrutinising the Bill until Monday. That is reflected in the relative speed of response of the professional bodies.
It is also worth recording another bit of news from last Friday. The Paymaster General thoroughly got the wind up about the implications of his proposals on foreign income dividends for business location in Britain. It appears—I rely on the Financial Times, from which I get my Budget these days—that one telephone call from RTZ was enough to blow him away in a puff of wind. There is an important point here which reads across to ACT. The point that companies with substantial foreign interests made on foreign income dividends—whatever proposals the Government come up with—was that they objected to being taxed both in the country of origin and here. That is exactly the same point, although slightly differently made, as we make about ACT. Two days and two rethinks. That is perhaps not too bad when we did not need a Budget at all.
I come now to talk a little more about the windfall tax and its implications for the ordinary taxpayer, which are becoming increasingly and alarmingly apparent. The economic problem with the tax is, as we all know, that it claims to build a continuing structure for labour market

policy on a one-off tax. The fairness problem is that it chases fat cats who may well have left the scene as long as 13 years ago. The reality problem is that it hits companies that have, taken together, many millions of shareholders, and even more stakeholders through pension funds' and insurance companies' investments in them. Indeed, the bulk of their beneficial owners are pensioners.
I was interested in the remarks made yesterday and again today by the Chief Secretary. He suggested that the Opposition had pulled in their ardour in criticising the windfall tax. That is not so. We were entitled to assume from the assurances given by Labour before the election in its manifesto that the windfall tax was the only tax increase that a Labour Government would impose. So it is hardly surprising that we had a good deal to say about it. Now, after the election, we all know better. We have heard since then of 17 Labour tax rises and, above all, of the £5 billion annual hit on ACT. Alongside that, the one-off hit of £5 billion in windfall taxation almost pales into insignificance. Of course, both will end up being paid by much the same ordinary people whom the Chancellor claimed to befriend, and for whom he solemnly pledged not to increase taxes.
Before I deal with ACT in more detail, it is worth taking the time of the House to consider the overall impact of the Labour Government on such typical, ordinary people. Of course, not everyone is typical, but I hope that this will do.
A 30-year-old family man with a mortgage faces the need to pay approximately an extra £10 a month because of the change in MIRAS, plus an extra £25 because of three successive interest rate hikes. According to the estimate by the Association of Consulting Actuaries—I accept that the figures differ—he will also have to pay £12 extra a month to top up his pension. So far the total increase is running at £47 a month, but we must add the cost of second-round consequences, including the impact of pension changes on local authority pension costs and perhaps a couple of pounds a week for petrol. Even if he does not drink or smoke, he will then be paying an extra £50 a month or thereabouts. That does not look well, indeed it looks particularly bad for a Government who have pledged not to increase taxes.
One of my constituents, Mr. Morrison, recently told me in a letter:
I phoned Mr. Brown prior to the election, concerning future fiscal policies. He informed me that no planned reduction in MIRAS would take place, and that I should look at the Labour Party Manifesto which did not include such measures.
Perhaps rather like one or two of the advertisements on the radio for financial institutions, my constituent should record his telephone calls to eliminate any possible confusion.
I must express my genuine personal disappointment at the absence of a proper green report with the Budget. That is another broken pledge. I know that the Financial Secretary said earlier today that one would be prepared for the next Budget, which rather sounds as though this Budget is not really important and is considered a second-class one. I hope that, when such a report comes out, the hon. Lady and her right hon. and hon. Friends will follow our precedent by balancing green taxes with other helpful tax reductions. One should have a balanced package.
I shall also refer to the continents I made during the debate on the Budget last week about the handling of these matters. I, too, utterly deprecate the Government's


wish to ram the Bill through with excess haste and their use of an unprecedented advance guillotine. I must ask whether they have something to hide. We on the Conservative Benches are determined, nevertheless, to expose the flaws in this decomposing and discredited Budget and Finance Bill.
We regret the arguments made by the Leader of the House at business questions today when she implied that the length of the Bill in column inches should, ipso factor, determine its time in Committee. By saying so she tried to play down the importance of the Bill, which, at the same time, her right hon. Friend the Chancellor has trumpeted.

Mr. Ivor Caplin: I wonder whether the hon. Gentleman could explain to me, a new Member of the House, why the same guillotine procedure was used 1993?

Mr. Boswell: I think that I am right to say that we did not move straight to impose a guillotine before consideration. The Labour party says that all its proposals are entirely clear, so I am surprised that they are only just becoming apparent now.
When it comes to pensions, the Government like to play it pianissimo. Perhaps that is the only tactic that they have left to erase the cheerful assertion by the Financial Secretary on Thursday, who said:
The measure is good for pensions and pensioners, not bad for them … People should understand that our reforms will benefit pension funds."—[Official Report,3 July 1997: Vol. 297, c. 507.]
To me, that reveals either disturbing self-delusion, a simple misunderstanding or a deep cynicism. It is rather like suggesting in the middle of world war two that innocent civilians should have been grateful being subjected to saturation bombing. It is not so much new Labour as Newspeak.
The Government would do better to listen to the arguments than merely to assume that they have no problems. The Government would do better to listen to the experts and to give them time to consider the changes than to rush into something that they will learn to regret. Alter the debates on the Budget, do the Government really still believe that cancelling £5 billion of ACT credits for pension funds each year will have no effect on their ability to pay out pensions?
Each estimate varies, but it is interesting to consider those produced by Association of Consulting Actuaries, which summarises its conclusions as saying that the Budget could reduce investment and will reduce pensions for millions of people. It goes on to give illustrative figures which show that a person of 30 would face an effective reduction of 11 per cent., a person of 40 would face a reduction of 7 per cent. and a person of 50 would face a reduction of 4 per cent. I am relieved that those figures chime in with my own lay estimate of 5 to 15 per cent., which I offered at the House a week ago.
The Government's answer to those clear professional conclusions is to cast doubt on the soundness of the actuarial profession as if actuaries were fuddy-duddies who took no account of capital growth. The actuarial profession, not the Government, has the security and best interests of pensioners at heart.
I shall remind the House of some of the detailed implications of the measure. Local authority pension funds face a loss estimated to he £300 million. That will have direct implications either for council tax or for the need to top up from public spending through the revenue support grant. Some 6 million personal pension holders have no one but themselves to call on to replace the hole in their finances.
At business questions today, one of my hon. Friends reminded the House that there would be inevitable effects on our secretaries and staff. I should warn colleagues that it will not stop there. Civil servants and Members of the House with no formal fund do not automatically escape the consequences. In due course, in equity, our contributions should be aligned with those that others in the private sector would he expected to pay. As my hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith) said yesterday, there are important implications for the interface between occupational pensions and SERPS. Are the Government prepared to adjust national insurance rebates to keep employees out of SERPS or would they rather that people opted back into SERPS? Would they be happy to do that when the Minister for Welfare Reform is determined to phase out the SERPS system? Would they be happy to have a major hole in the public finances?
I shall now come to the peroration. I would not dream of presuming to offer my own peroration, but sometimes people are so absorbed by the tax changes in the Budget speech that they do not notice the Chancellor's words in his peroration. I thought that his peroration was worth a touch more study by the House than it was perhaps given on Budget day itself.
The Chancellor spoke movingly and firmly of measures for stability, yet that was on a day when he had just announced measures—which were not well understood because their meaning was disguised—to destabilise pension funds. His measure would affect not just a handful of fat cats, but 15 million ordinary citizens. He spoke of investment, yet the double hits of the windfall tax affecting utilities and their shareholders—including pension funds and insurance companies—and of ACT operating directly on the value of dividends, take away the means for investment and may require companies to readjust their strategies. It was no accident that we introduced the partial imputation system in 1973—in fact, I was involved at the time. It was an attempt to produce a degree of equity in an area where, I concede, equity and precision are difficult to find owing to the different levels of the tax regime and tax rates. Taking away those means without consultation will be a major blow to investment, never mind the business consequences. If the measure is a blow for investment, it is equally a blow for employment opportunities.
The Chancellor also talked about the long-term interests of the many. I wonder why he did not say anything about the overall impact on prices, which was an additional 0.8 per cent. He did not say—neither did the Financial Secretary when I invited her to do so last week—that independent estimates by the Institute of Fiscal Studies on the overall impact of the measures suggest that the biggest percentage impact is on the lowest deciles of income. Therefore the Budget measures which had Labour Members waving their Order Papers, are ultimately regressive.
In a final flourish—I am sure that Labour Members will remember this—the Chancellor said:
It is a people's Budget for Britain's fulure."—[Official Report, 2 July 1997; Vol. 297. c. 316.]
In fact, it is a Budget, and now a Finance Bill, seeking to enact measures not for the people but paid for by the people. It mortgages Britain's future and we shall oppose it.

The Economic Secretary to the Treasury (Mrs. Helen Liddell): I am grateful for the opportunity to reply to the debate, which has been interesting in parts. It has sometimes seemed a little lonely in the Chamber given the emptiness of the Conservative Benches for much of the evening—[interruption.] Conservative Members may think that that is rich coming from me, but I have been in the Chamber for all but quarter of an hour and many of them have hardly been here at all.
I too, pay tribute to those hon. Members who have made their maiden speeches. My hon. Friend the Member for Bexlcyheath and Crayford (Mr. Beard) made a considered maiden speech. Taking into account his distinguished career, it was a speech of great modesty and humility. The House could learn much from what he said. There are some hon. Members who spoke later in the debate who could have learnt a lot from the demeanour of my hon. Friend.
We heard also from my hon. Friend the Member for Upminster (Mr. Darvill). I have never visited Upminster, but, having heard his gracious recognition of his predecessor and his committed description of his constituency, I will make a point of visiting Upminster at some time.
My hon. Friend the Member for Morecambe and Lunesdale (Miss Smith) made a speech which revealed to the House why she was the recipient of a 16 per cent. swing from Conservative to Labour. It was an outstanding speech by a young Member who I know will make a tremendous contribution to the House.
The hon. Member for North Shropshire (Mr. Paterson) spoke with great lucidity and the House was most impressed by the fact that at no point did he appear to refer to notes. I know how daunting it is to speak in the House for the first time. I made my maiden speech only three years ago next week. I congratulate all those hon. Members and look forward to their continuing contribution to the work of the House.
I shall now come to the substance of the debate. What a dog's breakfast of an Opposition: they will learn that when one leaves the Chamber, they need to be sure that nobody will come in afterwards and contradict what they have just said. We started with the shadow Chief Secretary, the right hon. Member for Wells (Mr. Heathcoat-Amory), who did not know whether he was coming or going. He did not know whether the Budget was intended to increase or decrease public spending or whether it would fiscally tighten the economy.

Mr. Heathcoat-Amory: rose—

Mrs. Liddell: I will gladly give way to the right hon. Gentleman.

Mr. Heathcoat-Amory: As the hon. Lady is inaccurately paraphrasing me, I shall put her right. I know

from the Red Book that there is a real reduction in public expenditure in this financial year and the next. I was inviting the Government to confirm that fact to the House. Will she do that now?

Mrs. Liddell: We have made it clear during the general election campaign and since becoming the Government that we recognise that hard decisions have to be taken. The right hon. Gentleman and his hon. Friends fail to realise that this is a Budget not about fine-tuning the economy but about rebalancing the economy and getting it on a firm footing for the future.

Mr. Clifton-Brown: Will the hon. Lady give way?

Mrs. Liddell: No. I want to make some progress.
I want to make an extremely important point. I could not work out what was happening on the Opposition Benches because Conservative Members were all over the place. Basically, the penny has not yet dropped—the Conservative party suffered a humiliating defeat at the general election. Indeed, some humility might not have gone amiss this evening in some of the speeches by Conservative Members.
We have been in government for two months—[Interruption.] Conservative Members cannot even allow the debate to continue without catcalling and displaying the sort of behaviour that made the people of this country decide that it was time for a change and time for renewed standards in public life.
It was touching to hear the praise that the shadow Chief Secretary heaped on the former Chancellor, the right hon. and learned Member for Rushcliffe (Mr. Clarke). Why, then, did he resign from the former Chancellor's ministerial team? Why did he not vote for him in the recent Conservative leadership election? Has he taken a Trappist vow? Why can he not tell us whether he supports the action taken today by the Monetary Policy Committee and the Bank of England on interest rates? Do Conservative Members still see interest rates as a political tool, to be used for political grandstanding?

Mr. Quentin Davies: rose—

Mrs. Liddell: I shall give way to the hon. Gentleman in due course. Having made his speech, he left the House and has only just returned.
One of the Government's first actions was to bring monetary stability to the economy. On six separate occasions this year, we had seen the Ken and Eddie show. The former Chancellor was repeatedly advised by the Governor of the Bank of England that it was appropriate to raise interest rates, but the right hon. and learned Gentleman was too frightened by his Back Benches and he foiled to do so.

Mr. Boswell: The hon. Lady said that the Government had brought monetary stability to the economy. Is she telling the House that that is a steady state?

Mrs. Liddell: Monetary stability, over time, will become—[Interruption.] Conservative Members have obviously enjoyed a slightly better dinner than I had. They should reflect on the fact that one of the first consequences of my right hon. Friend the Chancellor's


action on interest rates and the establishment of a Monetary Policy Committee was a reduction in long-term interest rates. A notable point this evening has been that the Opposition have failed to recognise that the long term is the aim of the Budget. It is the long term that the Government have at the forefront of their actions.

Mr. Davies: rose—

Mrs. Liddell: I shall give way to the hon. Gentleman. First, I want to ask him to enlighten the House on whether he agrees with his Front Bench on MIRAS and on VAT on fuel.

Mr. Davies: The hon. Lady is apparently blind; she is under the illusion that I am on the Front Bench. I assure her that it is not an illusion under which I have ever laboured—nor was I a member of the previous Administration. Because of that, I enjoy the great advantage of being able to speak for myself and to make my own contribution. My views on MIRAS have always been the same—it is a distortion which should be removed. If it cannot be removed immediately, it should be steadily reduced. That has always been my view. If I were a member of my Front Bench, I would have to persuade my colleagues of that view. Only if I succeeded in so persuading them would that become Opposition policy.
The hon. Lady is trying to get away from the Bank of England's decision to raise interest rates. Does she not realise that it was a regrettably necessary response to an irresponsible Budget, which failed to deal with the problem of increasing consumption that was identified in the Government's own Red Book?

Mrs. Liddell: I am glad that the hon. Member has never found it necessary to be concise. In today's Bank of England press notice announcing the decision of the Monetary Policy Committee, the Governor of the Bank of England mentioned the Budget's contractionary effects. That was a clear indication by the Bank that it recognises the sound actions of the Chancellor of the Exchequer.

Mr. Clifton-Brown: Will the Minister give way?

Mrs. Liddell: No. I should like to make some progress.
Some of the points made by Opposition Members have been very interesting, because they seem to have no coherent response to the Budget. In their attack on it, they have been all over the place. In some cases, Opposition Members have said that they appreciate the Government's goals. The hon. Member for East Yorkshire (Mr. Townend) said that he recognised the sense of what the Government plan to accomplish in our welfare-to-work proposals.
I shall attempt to take on board the very confused message sent by Opposition Members. They seem unable to realise that the Chancellor's Budget and the Finance Bill that will implement it have been based specifically on the promises on which we were elected on 1 May.

Mr. Clifton-Brown: Will the hon. Lady give way?

Mrs. Liddell: No, I wish to make some progress.
I realise that that must be a bizarre point for any Opposition Member to accept. In opposing the Budget, Opposition Members, regardless of which party they belong to, are opposing the fact that it is a Budget to get the country back to work—specifically to get young people back to work—and to reinvigorate our health service and education.
Several hon. Members mentioned private medical insurance—which is another example of the previous Government's inefficiency. They introduced a measure that had no impact on the people whom they claimed they were trying to help. The decision taken by the Chancellor to provide additional funding to the national health service will do more than private medical insurance—which is a benefit specifically for the few rather than the many—to help elderly people who are concerned about their health.

Mr. Clifton-Brown: Will the Minister give way?

Mrs. Liddell: No, I will not give way. I wish to make some progress.
It is interesting that the Conservative party had to go into opposition before they discovered the issue of personal pensions. Where were Conservative Members when people who were suffering the consequences of pensions mis-selling were pleading for assistance? Conservative Members did not assist them.
Conservative Members criticised my hon. Friend the Financial Secretary to the Treasury whenever she made the valid point that the Government's measures are in the long-term interests of the pensions industry. They fail to realise that the performance of companies is based on their being able to retain profits and to reinvest, so that the markets that fund pension companies can be guaranteed that there will be long-term growth.

Mr. Clifton-Brown: Will the Minister give way?

Mrs. Liddell: I am intrigued as to which part of no the hon. Member does not understand.
The hon. Member for Daventry (Mr. Boswell) mentioned the actuaries' report. He completely failed to take into account the fact that the actuaries themselves acknowledge that they had failed to take account of the reductions in corporation tax. I did not hear one Opposition Member refer to the reductions for large and small companies. Indeed, I heard one criticising the arrangements that we are making to improve capital allowances to small companies.
Some Opposition Members made much of their own backgrounds in business. They should recognise that one of the most important ways to secure growth in the economy is to ensure that small to medium-sized enterprises can invest and take decisions, unconstrained by the difficulties of trying to raise capital in a competitive marketplace.
My hon. Friend the Member for Eastwood (Mr. Murphy) made an excellent, reasoned and considered speech and went into some detail about the earlier clauses of the Bill. It was edifying to see a new Member taking the trouble to deal properly with the subject in hand. I acknowledge that the hon. Member for Daventry also paid tribute to my hon. Friend.
My hon. Friend made a very interesting and valid point about the nature of our welfare-to-work proposals. We must ensure that the employment that we generate for


250,000 young people leads to real qualifications, which is why, when he addressed the House last week, my right hon. Friend the Secretary of State for Education and Employment went into great detail about the standards that will be expected of schemes to bring young people from unemployment into work.

Mr. Clifton-Brown: Will the hon. Lady give way?

Mrs. Liddell: No; I have made it clear that I am intent on making progress.
My hon. Friend the Member for Eastwood also referred to the lack of faith among young people. I am not surprised that, after 18 years of a Tory Government—a Government who behaved exactly as Conservative Members are behaving this evening—young people have in some cases lost faith in the ability of the Government to do something for them. We must reverse that for the good of society. That is why the Chancellor has invited hon. Members from all parts of the House to act as ambassadors to ensure that young people are encouraged to go from welfare into employment. It is a life-enhancing opportunity—[Laughter.] Some Conservative Members, who have never had to confront unemployment, mock people who have and who behave honourably in the face of it.
The guillotine was mentioned. It was particularly interesting to see how few Opposition Members were in the Chamber for much of this evening. The hon. Member for Kingston and Surbiton (Mr. Davey) spoke about making time for advisers to bring hon. Members up to speed. I always enjoy his speeches, but I have to tell him that we are not here to suit ourselves—we are here to serve the country. The country voted for change and, in getting young people into work, the Government are determined not to be obstructed by the efforts of the Tory party, which has not yet taken into account the fact that it lost the general election and that the people of this country want change and want it soon.
The hon. Member for Chelmsford, West (Mr. Burns) asked a specific question about long-term care. I recognise that it is a matter of considerable concern to him. It relates to national assistance legislation. I undertake to write to him in due course, but I can say that the Government are committed to a royal commission on long-term care.

Mr. Burns: rose—

Mrs. Liddell: I am not dismissing the hon. Gentleman's specific point and I undertake to write to him. However, in more general terms, we are committed to a royal commission on long-term care. We all recognise that it is a growing problem and the Labour Government are committed to sorting out many of the difficult problems that confront us.
I was delighted to hear the hon. Member for Twickenham (Dr. Cable) refer to Balogh and Kaldor. There are still a few of us in the House who know that they are not a piano duet from the mid-1960s. He made a number of points about the impact of windfall payments from the conversion of building societies. The compensation paid was factored into our decisions and forecasts. We shall continue to keep a watch on the situation.
In the next couple of weeks, we shall have an opportunity to go into the first Finance Bill of a Labour Government in some detail. I again pledge that we shall listen seriously to the points made by Opposition Members, but we must listen to the people who elected us. They elected us for growth, stability and an economy that is committed.

Question put, That the Bill be now read a Second time:—

The House divided: Ayes 314, Noes 179.

Division No. 52]
[10 pm


AYES


Abbott, Ms Diane
Cohen, Harry


Anderson, Janet (Rossendale)
Colman, Tony (Putney)


Armstrong, Ms Hilary
Connarty, Michael


Ashton, Joe
Cooper, Yvette


Atherton, Ms Candy
Corbett, Robin


Atkins, Charlotte
Corbyn, Jeremy


Austin, John
Corston, Ms Jean


Banks, Tony
Cousins, Jim


Barnes, Harry
Cranston, Ross


Barron, Kevin
Crausby, David


Battle, John
Cryer, John (Hornchurch)


Bayley, Hugh
Cummings, John


Beard, Nigel
Cunliffe, Lawrence


Beckett, Rt Hon Mrs Margaret
Cunningham, Jim (Cov'try S)


Begg, Miss Anne (Aberd'n S)
Curtis-Thomas, Mrs Claire


Bell, Stuart (Middlesbrough)
Darling, Rt Hon Alistair


Benn, Rt Hon Tony
Darvil, Keith


Bennett, Andrew F
Davey, Valerie (Bristol W)


Benton, Joe
Davies, Rt Hon Denzil (Llanelli)


Berry, Roger
Davies, Geraint (Croydon C)


Best, Harold
Davis, Terry (B'ham Hodge H)


Betts, Clive
Dawson, Hilton


Blears, Ms Hazel
Dean, Mrs Janet


Blizzard, Bob
Denham, John


Boateng, Paul
Dismore, Andrew


Borrow, David
Dobbin, Jim


Bradley, Peter (The Wrekin)
Dobson, Rt Hon Frank


Bradshaw, Ben
Donohoe, Brian H


Brinton, Mrs Helen
Doran, Frank


Brown, Rt Hon Gordon (Dunfermline E)
Drew, David



Dunwoody, Mrs Gwyneth


Brown, Rt Hon Nick (Newcastle E)
Eagle, Angela (Wallasey)


Brown, Russell (Dumfries)
Edwards, Huw


Browne, Desmond (Kilmarnock)
Efford, Clive


Butler, Christine
Ellman, Ms Louise


Byers, Stephen
Ennis, Jeff


Campbell, Alan (Tynemouth)
Fisher, Mark


Campbell, Mrs Anne (C'bridge)
Fitzpatrick, Jim


Campbell, Ronnie (Blyth V)
Flint, Caroline


Campbell-Savours, Dale
Flynn, Paul


Cann, Jamie
Follett, Barbara


Caplin, Ivor
Foster, Rt Hon Derek


Casale, Roger
Foster, Michael John (Worcester)


Caton, Martin
Foulkes, George


Cawsey, Ian
Fyfe, Maria


Chapman, Ben (Wirral S)
Galloway, George


Chaytor, David
Gapes, Mike


Chisholm, Malcolm
George, Bruce (Walsall S)


Clapham, Michael
Gerrard, Neil


Clark, Rt Hon Dr David (S Shields)
Gibson, Dr Ian


Clark, Dr Lynda (Edinburgh Pentlands)
Godman, Dr Norman A



Godsiff, Roger


Clark, Paul (Gittingham)
Goggins, Paul


Clarke, Charles (Norwich S)
Golding, Mrs Llin


Clarke, Rt Hon Tom (Coatbridge)
Gordon, Mrs Eileen


Clarke, Tony (Northampton S)
Grant, Bernie


Clelland, David
Griffiths, Jane (Reading E)


Clwyd, Ann
Griffiths, Nigel (Edinburgh S)


Coaker, Vernon
Griffiths, Win (Bridgend)


Coffey, Ms Ann
Grogan, John






Gunnell, John
Mahon, Mrs Alice


Hall, Mike (Weaver Vale)
Mallaber, Judy


Hall, Patrick (Bedford)
Marek, Dr John


Hanson, David
Marsden, Paul (Shrewsbury)


Harman, Rt Hon Ms Harriet
Marshall, Jim (Leicester S)


Heal, Mrs Sylvia
Marshall-Andrews, Robert


Henderson, Doug (Newcastle N)
Martlew, Eric


Henderson, Ivan (Harwich)
Meacher, Rt Hon Michael


Hepburn, Stephen
Meale, Alan


Heppell, John
Merron, Gillian


Hesford, Stephen
Michael, Alun


Hewitt, Ms Patricia
Michie, Bill (Shef'ld Heeley)


Hill, Keith
Milburn, Alan


Hodge, Ms Margaret
Moffatt, Laura


Hoey, Kate
Moran, Ms Margaret


Home Robertson, John
Morgan, Ms Julie (Cardiff N)


Hood, Jimmy
Morgan, Rhodri (Cardiff W)


Hoon, Geoffrey
Morris, Ms Estelle (B'ham Yardley)


Hope, Phil
Morris, Rt Hon John (Aberavon)


Hopkins, Kelvin
Mountford, Kali


Howarth, Alan (Newport E)
Mudie, George


Howarth, George (Knowsley N)
Murphy, Denis (Wansbeck)


Hoyle, Lindsay
Murphy, Jim (Eastwood)


Hughes, Ms Beverley (Stretford)
Murphy, Paul (Torfaen)


Hughes, Kevin (Doncaster N)
Naysmith, Dr Doug


Humble, Mrs Joan
Norris, Dan


Hurst, Alan
O'Brien, Mike (N Warks)


Hutton, John
O'Hara, Edward


Iddon, Dr Brian
Olner, Bill


Illsley, Eric
O'Neill, Martin


Jackson, Ms Glenda (Hampstead)
Organ, Mrs Diana


Jackson, Helen (Hillsborough)
Osborne, Mrs Sandra


Jamieson, David
Pearson, Ian


Jenkins, Brian (Tamworth)
Pendry, Tom


Johnson, Miss Melanie (Welwyn Hatfield)
Pickthall, Colin



Pike, Peter L


Jones, Barry (Alyn & Deeside)
Plaskitt, James


Jones, Ms Fiona (Newark)
Pollard, Kerry


Jones, Jon Owen (Cardiff C)
Pond, Chris


Jones, Martyn (Clwyd S)
Pope, Greg


Jowell, Ms Tessa
Pound, Stephen


Kaufman, Rt Hon Gerald
Prentice, Ms Bridget (Lewisham E)


Keeble, Ms Sally
Prentice, Gordon (Pendle)


Keen, Alan (Feltham & Heston)
Prescott, Rt Hon John


Keen, Mrs Ann (Brentford)
Primarolo, Dawn


Kemp, Fraser
Prosser, Gwyn


Khabra, Piara S
Purchase, Ken


Kidney, David
Quin, Ms Joyce


Kilfoyle, Peter
Radice, Giles


King, Andy (Rugby & Kenilworth)
Rammell, Bill


King, Ms Oona (Bethnal Green)
Rapson, Syd


Ladyman, Dr Stephen
Raynsford, Nick


Lawrence, Ms Jackie
Reid, Dr John (Hamilton N)


Laxton, Bob
Robertson, Rt Hon George (Hamilton S)


Lepper, David



Levitt, Tom
Robinson, Geoffrey (Cov'try NW)


Lewis, Ivan (Bury S)
Roche, Mrs Barbara


Liddell, Mrs Helen
Rogers, Allan


Livingstone, Ken
Rooney, Terry


Lloyd, Tony (Manchester C)
Ross, Ernie (Dundee W)


Love, Andrew
Rowlands, Ted


McAvoy, Thomas
Roy, Frank


McCabe, Stephen
Ruane, Chris


McCafferty, Ms Chris
Ruddock, Ms Joan


McCartney, Ian (Makerfield)
Ryan, Ms Joan


McDonagh, Siobhain
Salter, Martin


Macdonald, Calum
Savidge, Malcolm


McDonnell, John
Sawford, Phil


McGuire, Mrs Anne
Sedgemore, Brian


McKenna, Ms Rosemary
Sheldon, Rt Hon Robert


Mackinlay, Andrew
Shipley, Ms Debra


McNamara, Kevin
Short, Rt Hon Clare


McNulty, Tony
Singh, Marsha


MacShane, Denis
Skinner, Dennis


McWalter, Tony
Smith, Angela (Basildon)


McWilliam, John (Morecambe & Lunesdale)
Smith, Miss Geraldine






Twigg, Derek (Halton)


Smith, Jacqui (Redditch)
Twigg, Stephen (Enfield)


Smith, John (Glamorgan)
Vaz, Keith


Smith, Llew (Blaenau Gwent)
Vis, Dr Rudi


Soley, Clive
Walley, Ms Joan


Southworth, Ms Helen
Watts, David


Spellar, John
White, Brian


Squire, Ms Rachel
Whitehead, Dr Alan


Starkey, Dr Phyllis
Wicks, Malcolm


Stevenson, George
Willams, Rt Hon Alan (Swansea W)


Stewart, Ian (Eccles)



Stinchcombe, Paul
Williams, Alan W (E Carmarthen)


Stoate, Dr Howard
Williams, Mrs Betty (Conwy)


Stott, Roger
Wills, Michael


Stringer, Graham
Winnick, David



Winterton, Ms Rosie (Doncaster C)


Taylor, Rt Hon Mrs Ann (Dewsbury)
Wood, Mike



Woolas, Phil


Taylor, David (NW Leics)
Worthington, Tony


Thomas, Gareth (Clwyd W)
Wray, James


Thomas, Gareth R (Harrow W)
Wright, Dr Tony (Cannock)


Timms, Stephen
Wright, Tony D (Gt Yarmouth)


Tipping, Paddy
Wyatt, Derek


Todd, Mark



Touhig, Don
Tellers for the Ayes:


Trickett, Jon
Jane Kennedy and


Turner, Dr George (NW Norfolk)
Mr. Jim Dowd.




NOES


Ainsworth, Peter (E Surrey)
Davies, Quentin (Grantham)


Arness, David
Day, Stephen


Ancram, Rt Hon Michael
Dorrell, Rt Hon Stephen


Arbuthnot, James
Duncan, Alan


Atkinson, David (Bour'mth E)
Duncan Smith, Iain


Atkinson, Peter (Hexham)
Emery, Rt Hon Sir Peter


Baker, Norman
Evans, Nigel


Baldry, Tony
Faber, David


Ballard, Mrs Jackie
Fabricant, Michael


Bercow, John
Fallon, Michael


Beresford, Sir Paul
Flight, Howard


Blunt, Crispin
Forth, Rt Hon Eric


Body, Sir Richard
Foster, Don (Bath)


Boswell, Tim
Fowler, Rt Hon Sir Norman


Bottomley, Peter (Worthing W)
Fraser, Christopher


Brady, Graham
Gale, Roger


Brand, Dr Peter
Garnier, Edward


Brazier, Julian
Gibb, Nick


Brood, Colin
Gill, Christopher


Brooke, Rt Hon Peter
Gillan, Mrs Cheryl


Browning, Mrs Angela
Goodlad, Rt Hon Alastair


Bruce, Ian (S Dorset)
Gorman, Mrs Teresa


Bruce, Malcolm (Gordon)
Gorrie, Donald


Burnett, John
Gray, James


Burns, Simon
Green, Damian


Burstow, Paul
Greenway, John


Butterfill, John
Grieve, Dominic


Cable, Dr Vincent
Gummer, Rt Hon John


Campbell, Menzies (NE Fife)
Hamilton, Rt Hon Sir Archie


Cash, William
Hammond, Philip


Chapman, Sir Sydney (Chipping Barnet)
Harris, Dr Evan



Harvey, Nick


Chidgey, David
Hawkins, Nick


Chope, Christopher
Heald, Oliver


Clappison, James
Heath, David (Somerton & Frome)


Clark, Rt Hon Alan (Kensington)
Heathcoat-Amory, Rt Hon David


Clark, Dr Michael (Rayleigh)
Hogg, Rt Hon Douglas


Clarke, Rt Hon Kenneth (Rushcliffe)
Horam, John



Howard, Rt Hon Michael


Clifton-Brown, Geoffrey
Howarth, Gerald (Aldershot)


Collins, Tim
Hughes, Simon (Southwark N)


Colvin, Michael
Hunter, Andrew


Cormack, Sir Patrick
Jack, Rt Hon Michael


Cotter, Brian
Jackson, Robert (Wantage)


Curry, Rt Hon David
Jenkin, Bernard (N Essex)


Davey, Edward (Kingston)
Johnson Smith, Rt Hon Sir Geoffrey


Davis, Rt Hon David (Haltemprice)







Jones, Nigel (Cheltenham)
St Aubyn, Nick


Keetch, Paul
Sanders, Adrian


King, Rt Hon Tom (Bridgwater)
Sayeed, Jonathan


Kirkbride, Miss Julie
Shephard, Rt Hon Mrs Gillian


Laing, Mrs Eleanor
Shepherd, Richard (Aldridge)


Lansley, Andrew
Simpson, Keith (Mid-Norfolk)


Leigh, Edward
Soames, Nicholas


Letwin, Oliver
Spelman, Mrs Caroline


Lewis, Dr Julian (New Forest E)
Spicer, Sir Michael


Lidington, David
Spring, Richard


Lilley, Rt Hon Peter
Stanley, Rt Hon Sir John


Lloyd, Rt Hon Sir Peter (Fareham)
Steen, Anthony


Loughton, Tim
Streeter, Gary


Luff, Peter
Stunell, Andrew


Lyell, Rt Hon Sir Nicholas
Swayne, Desmond


MacGregor, Rt Hon John
Syms, Robert


McIntosh, Miss Anne
Tapsell, Sir Peter


MacKay, Andrew
Taylor, Ian (Esher& Walton)


Maclean, Rt Hon David
Taylor, John M (Solihull)


McLoughlin, Patrick
Taylor, Sir Teddy


Madel, Sir David
Temple-Morris, Peter


Malins, Humfrey
Tonge, Dr Jenny


Maples, John
Townend, John


Maude, Rt Hon Francis
Tredinnick, David


Mawhinney, Rt Hon Dr Brian
Trend, Michael


May, Mrs Theresa
Tyrie, Andrew


Merchant, Piers
Viggers, Peter


Moore, Michael
Wallace, James


Moss, Malcolm
Walter, Robert


Nicholls, Patrick
Wardle, Charles


Norman, Archie
Wells, Bowen


Oaten, Mark
Whitney, Sir Raymond


Öpik, Lembit
Whittingdale, John


Ottaway, Richard
Widdecombe, Rt Hon Miss Ann


Page, Richard
Wilkinson, John


Paice, James
Willetts, David


Paterson, Owen
Willis, Phil


Pickles, Eric
Winterton, Mrs Ann (Congleton)


Prior, David
Winterton, Nicholas (Macclesfield)


Redwood, Rt Hon John
Woodward, Shaun


Rendel, David
Yeo, Tim


Robathan, Andrew
Young, Rt Hon Sir George


Roe, Mrs Marion (Broxbourne)



Rowe, Andrew (Faversham)
Tellers for the Noes:


Ruffley, David
Mr. James Cran and


Russell, Bob (Colchester)
Mr. Nigel Waterson.

Question accordingly agreed to.

Bill read a Second time.

Ordered,

That—

(1) Clauses 1, 15, 17 and 19 be committed to a Committee of air whole House:

(2) the remainder of the Bill be committed to a Standing Committee;

(3) when the provisions of the Bill considered, respectively, by the Committee of the whole House and by the Standing Committee have been reported to the House, the Bill be proceeded with as if the Bill had been reported as a whole to the House from the Standing Committee.—[Mr. Liddell.]

Committee tomorrow.

Orders of the Day — SELECT COMMITTEES RELATED TO GOVERNMENT DEPARTMENTS

Ordered,
That, for the remainder of this Parliament, Standing No. 152 (Select committees related to government departmenis shall have effect as if, in the third column of the table in paragraph (2), in the items relating to the Foreign Affairs Committee and to the Treasury Committee, for '11' there were substituted '12'.—[Mr. Jamieson.]

PETITION

Ben Needham

Ms Margaret Hodge: The petition comes from citizens of the United Kingdom and was brought forward by a constituent of mine—[Interruption.]

Mr. Deputy Speaker (Sir Alan Haselhurst): Order. I am sorry to interrupt the hon. Lady. Will hon. Members who are leaving the Chamber please do so expeditiously and as quietly as possible? I call Ms Hodge.

Ms Hodge: The petition declares:
That the disappearance of Ben Needham a child of 21 months of age and a British subject, from the island of Kos in July 1991 and the failure of the local authorities to find him in the intervening years is a matter of concern to the Citizens of the United Kingdom.
The Petitioners therefore request that the House of Commons request the Foreign Secretary to seek assurances from the Government of Greece that they are doing all that is practically possible to find this missing child and that they will continue to carry out thorough searches of their territories until the child is found.
And your Petitioners, as in duty bound, will ever pray.

To lie upon the Table.

Debt Recovery

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Jamieson.]

Miss Ann Widdecombe: I should first say how grateful I am to Madam Speaker for selecting this topic for debate.
I am bringing before the House my concerns about the debt recovery practices of the Inland Revenue and, more particularly, Customs and Excise, as, over the 10 years during which I have represented Maidstone, I have become troubled by a steady stream of constituents' experiences. They have explained to me that, when they make reasonable offers to Customs and Excise and also, occasionally, to the Inland Revenue, those offers are turned down and instead those bodies move immediately for bankruptcy.
My concern is not just for my constituents, but for value to the taxpayer. Clearly, it is to the greater benefit of the taxpayer if a business that is in trouble can make fairly modest but nevertheless steady payments than if that business is bankrupted, immediately unable to operate and, when there are no assets at all, the taxpayer makes no recovery.
Although I appreciate that, occasionally, difficult decisions have to be made, the cases that I have had cause either to write about to successive Ministers or to bring to the attention of either the Inland Revenue or Customs and Excise are fairly clear. I have begun to fear that there may be two sorts of businesses in trouble: the ones that have obtained the intervention of their Member of Parliament and those that have not. I find that, when I intervene, very often some arrangement that hitherto has been deemed wholly unacceptable is suddenly found to be acceptable and put in place.
In respect of the case to which I am about to refer, my constituent wrote to me and I raised the matter with Customs and Excise. I was told that my constituent's proposal was completely unacceptable, that the case had been dealt with properly and that, as the major preferential creditors, Customs and Excise were going to vote against accepting a revised agreement. I responded immediately to that letter by saying that I noted their position, but because the case was one in a long line, I intended to raise the matter in Parliament. Suddenly and within 48 hours, my constituent's offer had, strangely, become acceptable.
I am concerned that taxpayers' interests should be protected, but their interests are not protected reasonable offers are turned down. I shall now refer to the specific case of the most recent, but by no means the only, constituent to bring such a problem to me. To save him embarrassment, I shall refer to him as Mr. X. He wrote to me, saying that he had found himself in a serious situation as a result of decisions taken by Customs and Excise. Between 1993 and 1995, he worked on a self-employed basis. His business was successful, it expanded and he took on various subcontractors. However, during 1995, he began to encounter serious financial problems. He was dealing with several clients who went into liquidation, leaving him with unpaid debts of many thousands of pounds and a resultant poor cash flow, especially as other clients paid their invoices many weeks after they were due. In addition, he claimed that he was also subject to

malicious action by some of the subcontractors, who were trying to form their own company in direct competition to him.
As a result, in September 1995, my constituent entered into an individual voluntary arrangement in Tunbridge Wells county court. Virtually all his creditors accepted that the problems were not of his making and proposals were approved whereby he would pay to the appointed supervisor £1,000 a month for four years in full and final settlement of all debts. Mr. X found that£1,000 a month proved to be more than he could realistically afford, so the supervisor appointed under the voluntary arrangement suggested that it would be reasonable to write to the creditors to propose a reduction in his monthly payment to £500. That £500 a month was still being offered to his creditors, and the taxpayer, through Customs and Excise, would have benefited from it.
The supervisor duly sent out the appropriate letters and voting forms to the creditors and almost all of them accepted that the reduction was reasonable. One creditor did not—Customs and Excise, the largest creditor. Out of approximately £80,000 in total debt, Customs and Excise's debt was registered at some £50,000, although the accuracy of that figure was disputed with my constituent's accountant.
As Mr. X pointed out, the result of Customs and Excise's decision not to accept the voluntary payments could be that he would go bankrupt, lose his current employment and have great difficulty finding other employment. More important, not one of the creditors, including Customs and Excise, would receive any payment of any part of their debt. Therefore, the decision made by Customs and Excise, he believed, was not in the interests of any of the creditors or the Crown. I am inclined to agree with him.
Mr. X told me that he spoke to his supervisor and she told him that it was interesting to note that all the creditors who were personally affected voted in his favour, and only Customs and Excise voted against. She pointed out that the money was not personally owed to Customs and Excise staff and they had nothing to lose. She added that that was often the way in which Customs and Excise dealt with such matters, because they would rather just get people out of the way. Mr. X was concerned and puzzled by the decision. He did not understand how Customs and Excise could preside over a situation in which everyone lost out.
I contacted Customs and Excise about a letter from my constituent, dated 11 June. After a series of telephone calls, Customs and Excise wrote to me on 17 June to say that they were satisfied that the proposals were considered on their merits and that the decision to reject the offer was correct. They went on to explain the background. In a further letter, Customs and Excise explained, I think rather tellingly, that they supported the arrangement— after I had said that I intended to raise the matter in Parliament. They went on to say that there had been no distribution of the funds paid into the arrangement.
The supervisor's remuneration had to be paid, and a sum of £1,000 had been set aside to enable the supervisor to petition for bankruptcy if the arrangement failed. That is not unusual. My experience of constituents in trouble is that, regularly, receivers' fees, supervisors' fees and the general costs of insolvency practice amount


to such a large sum that it seriously erodes the amount recovered by creditors, and places an ensuing larger burden on constituents.
I wish to ask the Minister some straightforward questions. I acknowledge that she is the latest in a long line of Ministers whom I have asked these questions, and I have no great hope that her answers will be any different. Nevertheless, the public should hear them. Is it the duty of both the Inland Revenue and Customs and Excise to act in the interests of the taxpayer and, by acting in those interests, is it their duty to maximise the amount that the taxpayer recovers? Is that their guiding principle? Will the Minister ensure that it is their guiding principle? If so, it is difficult to see how they can so often refuse admittedly modest offers, which nevertheless would result in some repayment for the taxpayer. Are there any plans to limit the amount taken by receivers, supervisors and others involved in insolvency practice, so that creditors get the benefit of any moneys that businesses or individuals in trouble may be able to pay?
Had this been an isolated case, I should not be raising the issue tonight, but it is far from an isolated case. I shall not say that such cases come before me every week, as they do not. However, they do come up every few months, and they always have the same outcome—intervention nearly always results in the offer that was previously deemed unacceptable suddenly becoming acceptable. There is a real public interest in the issue. When I said that I was raising it tonight, I immediately became the recipient of numerous tales of woe from up and down the country, of which I will spare the Minister the details. I should be grateful for her observations on the principal questions that I have asked.

The Financial Secretary to the Treasury (Dawn Primarolo): I am grateful for the opportunity of answering the right hon. Member for Maidstone and The Weald (Miss Widdecombe), and I shall do my best to deal with the points she has raised.
The first point that needs to be made is that the Inland Revenue and Customs and Excise use their powers to enforce payment of debt only in respect of tax that the law says is collectable. The money does not belong to the business concerned, but is money that the business has collected which belongs to the taxpayer.
The right hon. Member raised a number of concerns which I know trouble many hon. Members. I, too, have been involved on behalf of my constituents in the type of negotiations that the right hon. Lady described.
The first question is whether the likely solution of cases is improved by the intervention of a Member of Parliament. The second is whether reasonable offers are being accepted. The right hon. Lady referred to a specific case. I am sure that she will furtive me if I do not refer in detail to that case, as I do not have all the details and, frankly, I do not think that it would be proper of me to do so in the House.
The right hon. Lady mentioned the duty of the Inland Revenue and the Customs to maximise their return and asked what were the guiding principles. They are, first, that the system has to be fair to all taxpayers. It has to be fair to businesses that pay their taxes on time. Those that delay paying their taxes, therefore, have an unfair commercial advantage.
I must briefly point out the Government's attitude to such issues. I fully understand—so do the Government— that it benefits no one, least of all the Exchequer, to close down businesses that could have continued, despite the fact that they might owe substantial amounts of taxpayers' money to the Revenue. At the same time, however, Customs and the Inland Revenue have a statutory duty to collect all those taxes that are legally required to be collected.
The decision as to how those are to be balanced is difficult. As I said, allowing consistent late payment by businesses—we are talking about the small proportion that find themselves in this difficult situation—could confer unfair advantages on them, and the Department has a duty to ensure that it is fair to all businesses in the way in which it collects taxes.
We recognise that some taxpayers sometimes have problems with their cash flow. The policy of the Revenue and Customs is to take a positive approach and to try to work with individuals and businesses that are experiencing genuine short-term difficulties. That policy relies on the companies disclosing the information either to Customs or the Revenue and asking for assistance so that they can develop a voluntary payment plan. If the companies fail to do so, it is hardly fair to criticise the Revenue departments for not having all the information.
I am sure that the right hon. Lady would agree that sometimes it would be more helpful if our constituents disclosed more information about the true position of their companies at the beginning, rather than halfway through the negotiations.
It is important that Customs and the Revenue are acquainted with the problems and are thus able to assist. Obviously, both the departments appreciate the personal tragedy when bankruptcy is looming. The idea that they somehow enter into this with great glee to undermine and destroy businesses is unfair on the officials, who are following through the requirements of Parliament that they should collect the tax.

Miss Widdecombe: Nothing in my speech suggested that they entered into this with glee. There seems a pattern, however, of preferring to get things off their books—not necessarily with glee, but certainly with relief—rather than administering more modest and more realistic payments, which nevertheless return something to the taxpayer.

Dawn Primarolo: I accept the right hon. Lady's point. I do not agree that the departments have a strategy of getting problematic cases out of their hair and off the books, because they appreciate, as any sensible person would, that it is better to get some money than none, but a decision eventually has to be made about whether a business is viable and able to repay the moneys or will constantly accumulate greater debt and have an unfair position over other taxpayers.
I intended to outline the details of the decisions on debt collection, but I realise that the right hon. Lady is fully acquainted with the facts through her constituency work, so I will not delay the House on that matter. The two Revenue departments have to balance getting the tax that Parliament requires against a judgment about assisting a business to survive—because it is clearly in all our interests that businesses should continue—while


considering the question of fairness to all taxpayers. It is not as simple as maximising the tax return—would that it was—but the points that the right hon. Lady made are taken on board.
The right hon. Lady asked about reviews of fees taken by insolvency advisers, receivers and others. Those are a matter for Ministers at the Department of Trade and Industry, but I will ensure that her comments are passed on to the relevant Minister.

Mr. John Burnett: As the Minister probably knows only too well, there is a system for lawyers to have their fees taxed. Without wanting to put words into the mouth of the right hon. Member for Maidstone and The Weald (Miss Widdecombe), I wonder whether the Minister might suggest to the Department of Trade and Industry that such a system could be made available in the case of insolvency practitioners.

Dawn Primarolo: I will certainly make sure that the hon. Gentleman's comments are drawn to the attention of

the Ministers concerned, but I am sure that he would not expect me to make policy off the cuff this evening on an extremely important matter.
Although not many hon. Members are present in the House, I am sure that others will study Hansard because of the relevance to their constituencies and their experience with constituents. The area of operation of the two Revenue departments is always carefully considered and assessed. I should be happy to review in correspondence the details of the specific case that the right hon. Lady mentioned and any other relevant issues that she wants me to take up.
The Government and the Revenue departments take these matters extremely seriously and our objective must be to assist businesses while not allowing them to have an unfair advantage over other businesses or to cheat the taxpayers of money that is rightly theirs.

Question put and agreed to.

Adjourned accordingly at twenty-two minutes to Eleven o'clock.